Q&A With Allergan President and CEO Brent Saunders

Source: By Stephen Daily, Executive Editor, News, BMC

LAS VEGAS - It has been an active 5 years for Allergan President and CEO Brent Saunders. And the spotlight on the young executive known for his mastery of mergers and acquisitions is shining brighter than ever.

His track record of growing revenue and rewarding shareholders through acquisitions, innovation, and a solid product portfolio is well documented. And his success has led to his rapid ascension on the pharmaceutical executive ladder.

He became a CEO for the first time in 2010 with Bausch + Lomb. Three years later, he oversaw the sale of the company to Valeant Pharmaceuticals International for $8.7 billion. In October 2013, he became CEO of Forest Laboratories. Soon after, Actavis bought Forest and Mr. Saunders became CEO of the combined entity. Then just 1 year ago, in a $66 billion deal, Actavis purchased Allergan, helping thwart a hostile takeover bid by Valeant. Actavis assumed the Allergan name and made Mr. Saunders the CEO.

But Mr. Saunders is not resting on his laurels after his climb through the executive ranks. In recent weeks, reports have emerged about a potential blockbuster merger with Pfizer. Both companies have subsequently confirmed they are in “preliminary friendly discussions.” Such a deal, if successfully completed, would be the largest acquisition of any industry in 2015.

Perhaps not surprisingly, new reports from Bloomberg indicate that Mr. Saunders, 45, would be in line to be the CEO if the two companies reach a takeover agreement. Since the merger reports emerged, Mr. Saunders has remained calm and focused. During the Ophthalmology Innovation Summit, which preceded the American Academy of Ophthalmology meeting in Las Vegas, Mr. Saunders gave the Plenary Keynote Address and made clear he would not be discussing the potential deal with Pfizer. However, he focused much of his talk on the importance of investing in ophthalmic innovation, and he reiterated that he is committed to eye care. Mr. Saunders talked about the shift in the “pharmaceutical innovation ecosystem,” in which the driving force of innovation is now coming from smaller biotechnology and specialty pharma companies, rather than global pharma companies, which had previously driven the majority of new product revenue.

Following the meeting, Mr. Saunders spoke exclusively with Eyewiretoday.com about a variety of topics. While discussing a potential combination with Pfizer remained off-limits, Mr. Saunders discussed Allergan’s growing eye care portfolio, his philosophy on R&D, drug pricing, and his personal and professional goals.

Stephen Daily: At Allergan, there are currently 17 products in development in eye care. Can you talk about the health of the company’s eye care pipeline, and what is the company’s market outlook for ophthalmology and eye care?

Brent Saunders: Yes, we have a very strong R&D pipeline at Allergan in eye care. Really, I think that most of the programs, the 17 programs or so that are in there, largely fall into three buckets, and a few other areas that we are exploring. First, in glaucoma, we're really looking at trying to move from drops to dropless therapy with bimatoprost SR and the Xen stent (acquired from AqueSys) as some of the more important programs.

In dry eye, we hope over the next 6 years to be launching about five new products. Some of them are novel drugs. Some are looking at delivery of existing drugs, and then some really interesting new technologies like our Oculeve device, which is an electroceutical for a dry eye. As a market leader in dry eye, I think it's very important for us to continue to invest in R&D and innovation for this disease that is still under-treated and under-managed for patients.

The third big category is retina. We have an R&D partnership with Molecular Partners, where we're working on DARPins for retinal disease. Our lead program is abicipar, which is in phase 3 for AMD, and then moving into phase 3 next year for DME. We're very encouraged by the efficacy that we're seeing in that program, but we'll have to wait until we have phase 3 data probably some time toward the end of next year.

Mr. Daily: You have invested recently in your glaucoma pipeline with the acquisition of AqueSys and in your retina pipeline with late-stage products such as DARPin for wet AMD. What specific areas of eye care do you believe present the greatest potential for growth moving forward?

Mr. Saunders: I think there are quite a few. There are big categories with still unmet needs. So, take abicipar, and then ultimately the whole DARPin platform. There are some very good drugs on the market like Lucentis and Eylea for AMD and DME and some other diseases. All they do is slow progression. People still lose significant vision with AMD, and the injections are regular and very uncomfortable, which also slows down compliance, so we need to solve for both efficacy and ultimately we need to continue to invest to look for new mechanisms to halt or stop the progression of AMD and DME completely and other related retina conditions. So, there’s still a huge market with huge opportunities to innovate.

Even dry eye, which is obviously a category we know well with Restasis. As the market leader, it’s a category that we are really at the forefront of. Yes, there are some other drugs in development from other companies like Shire that are coming, but this is still a disease that afflicts 10s of millions of people around the world that go untreated or are treated superficially with OTC options. We need to continue to look at the entirety of the disease and look for better options and more complete options, or perhaps even combination therapy with anti-inflammatories that really protect the ocular surface.

Glaucoma is another one. It's still one of the leading causes of blindness. Again, we can slow or severely retard the decay of the optic nerve, but we can't actually stop glaucoma, so it’s still a great opportunity. In the short term, we're focused on delivering drugs in a more effective manner through bimatoprost SR. We're looking for alternatives to drops like our Xen stent, but there's still a lot of work to do around neuroprotection and really making sure the optic nerve stays healthy.

Mr. Daily: If we can circle back to dry eye for a minute. Shire recently announced positive OPUS-3 data for its dry eye drug candidate, lifitegrast, and the company is expecting FDA approval in 2016. Being that Restasis has been the only FDA-approved drug for dry eye for more than a decade, what is your outlook for Restasis moving forward?

Mr. Saunders: I think that Restasis has an incredibly strong outlook. It is a very well-understood drug and mechanism. It offers great relief for patients with dry eye. Physicians have found it incredibly useful. Almost 70% of Restasis users are repeat users, which is a good sign of their satisfaction with the drug. One of the bigger issues with dry eye drugs, Restasis and lifitegrast if it’s approved, is the delivery mechanism. The single dose, preservative-free delivery mechanism is one of the harder ways to deliver drug to the eye. It's almost akin to pointing a knife to your eye, so people have a hard time getting the drop in, and it's one of the biggest complaints we hear about Restasis.

We have just filed for a multidose, preservative-free bottle. The technology in that is quite significant in terms of being able to deliver preservative-free chronic medicine in a multidose, preservative-free bottle, and we hope to be launching that toward the end of next year for Restasis, while we also continue to bring out our other novel programs for dry eyes. So, I think Restasis will remain the market leader and we'll continue to innovate around Restasis, and we’ll continue to look for additional therapies for dry eye.

Mr. Daily: At the OIS meeting, you talked about innovation and investment in eye care. You said, “We're on the cusp of entering a new golden era of innovation in eye care.” Can you talk about that statement and why you believe investment in eye care is rising?

Mr. Saunders: Yes, eye care, I think, still has a tremendous opportunity, and I do believe that we're on the cusp of entering another golden age of innovation. Some of the key factors in that are when you look at the prevalence of eye disease, it's still incredibly large. There's still so much opportunity for innovation and improvement and treatment for the diseases, some of which we just discussed; whether it be AMD, or glaucoma, or dry eye, there's still so much opportunity to improve therapy and improve outcomes for patients, and so I think that's one important factor.

Second is that the ecosystem of ophthalmology and eye care is robust. There are so many innovators. There are so many strong companies willing to invest in R&D and innovation, and I think this is one of the really exciting areas of health care, where, if you have a good idea, there's a lot of venture money and the support system and the ecosystem to turn that idea into a business that can invest in R&D is high, and that's another big factor. Ultimately, I do think that our ability to bring those ideas to patients is becoming greater and greater as our global capacity, our ability to work with the physician community, and ultimately deliver medicines and services to patients is quite high.

Mr. Daily: OK, I’d like to change gears here a little bit away from eye care and to issues regarding the current state of operating a large drug company. When it comes to money and resources devoted to research and development, every company has a different philosophy. You have had a reputation as a CEO who is wary of the costs of early-stage drug development and have talked about the importance of partnering with small biotech companies and academia. Yet, other large pharma companies have often relied more on internal research and development. Can you talk about what your philosophy is when it comes to investing in drug discovery and what you believe is the most effective means to get a product from the development phase to commercialization?

Mr. Saunders: Yes, to be clear, I've always embraced innovation. I do believe innovation is the lifeline of our industry and certainly is at the heart of what Allergan is today. That being said, I think as a CEO and as a leader of our business, I've always been careful about how we spend our money, and so we always want to make sure that we're spending our money in a productive manner and where we believe we can add value.

When I look at discovery research, I look at it as an area in health care that has struggled, but that doesn't mean I'm against it; it means I want to do it with caution and with a lot of examination. That being said, when I took over Allergan, I really spent a lot of time looking at our discovery capabilities and our discovery labs, and what I learned was we did have a comparable advantage. We did have a group that was being productive. Therefore, I feel very comfortable investing in that group and in those programs.

Our model is really open science, and so our goal is to find the best ideas for innovation regardless of where they come from. It doesn't matter to me, to be fair, whether that idea comes from an internal bench scientist working in our labs or whether it comes from a small biotech company and in a different part of the country. The important thing is: Is that idea a good one? Can we invest to bring it to life? And ultimately, will it help patients? If that's the answer, I’m really agnostic to where it came from.

Mr. Daily: There has been a lot of focus recently on drug pricing, and a few high-profile cases of price gouging on behalf of pharma companies. The pricing policies of drug companies have caused political scrutiny and, in many cases, a lack of trust from the public and patients who rely on these drugs. As the CEO of a major pharma company, what are your thoughts on the recent public scrutiny over drug pricing? And can you talk about the process of trying to raise drug prices in a responsible manner and grow the business for shareholders?

Mr. Saunders: I think you said it well in the question. There have been a few controversies of late from companies that have, I think irresponsibly and egregiously, raised specific drug prices, and I think most of those companies are really outliers to the mainstream pharmaceutical industry. I think most of the pharmaceutical industry takes the responsibility around drug pricing quite seriously and tries to raise prices in a manner that's consistent with the value equation that they're creating, and I think we do that because we have a social contract, an unwritten social contract, with America. Let's talk about the United States right now. We are committed to investing in R&D. We are committed to investing for unmet medical need, and we are committed to running our businesses responsibly. But we also have to create a return, not only for our shareholders, but to justify the investment in innovation and R&D. And so all those things have to be balanced. And as a result, most mainstream companies—Allergan included—really try to look at how to raise drug prices and how to set drug prices. In particular, the last few years we have really tried to study the pharmacoeconomic benefit of the products in society and justify it. We don't sell one, but if you look at statins for example, I was reading a study a little bit ago, the statin class has essentially reduced about a trillion dollars of health care burden out of the United States in the form of improved cardiovascular health and, therefore, less cardiovascular disease, and the industry itself has put about less than 25% of that value in return for that trillion dollars.

A hard argument for people to understand if you're the consumer of drugs is—and rightly so—if you're sick, all you care about is what does it cost you. And so that's where the big disconnect comes. I think the transparency around drug pricing is important. I think the scrutiny is good. It's a positive that will hopefully keep companies in check that want to do egregious things but at the end of the day, we need to do this in a very responsible manner.

Mr. Daily: In recent years, we have seen more and more companies moving operations overseas through mergers and acquisitions to take advantage of a more favorable tax jurisdiction. Some CEOs have voiced their concerns about operating in the US’ tax regime, calling it a disadvantage in competing against foreign companies. Do you believe changes need to be made in the US to allow for a more favorable tax rate?

Mr. Saunders: Yes. To be fair, I think that has very little to do with tax rate. I think the United States has to become more competitive around the global versus territorial tax system. I think the real reason why companies have been moving abroad and why American companies have been disadvantaged competitively against foreign companies has almost nothing to do with tax rate in and of itself. It has to do with the double taxation of American companies’ foreign profits. Virtually no other country in the world has a double taxation on foreign profits like the United States does. That is really the main reason why this phenomenon exists, and I do believe the United States should solve it to make America more competitive.

Mr. Daily: In 2010, you became CEO of Bausch + Lomb, and since that time, you have been involved in several large deals: selling B+L to Valeant, later becoming CEO of Forest Laboratories, and soon after, CEO of Actavis, and then eventually, CEO of Allergan after the Actavis merger. Can you talk about your personal growth as an executive and what the last 5 years has been like?

Mr. Saunders: I grow every day. What makes my job so exciting is I learn new things all the time. My thinking evolves around how to do things, and clearly as I have grown as an executive, I've really learned the value of a strong team, a strong group of leaders around me, of working with really talented people and giving them the ability to succeed and grow as well. We've had a lot of fun. We've worked very hard. We've had a lot of challenges, but overall it's been a really satisfying experience.

Mr. Daily: And finally, looking forward, what are the long-term professional and personal goals for Brent Saunders?

Mr. Saunders: For me, it's just the continuing aspiration of being the best at what we do. I think that's always going to be a goal. You never achieve that status, but it’s that desire that I think creates our goal, our quest to constantly be improving, to learning, to listening, and to getting stronger and better. And I take that very personally. I try to come to work every day and just do things a little bit better, and act a little bolder, and come up with better ways of working. I've always tried to ask all of our colleagues around the world at Allergan to try to do the same thing, and if you can get roughly 30,000 people all trying to do things a little bit different, a little bit better everyday, it really becomes a very powerful place. We’re starting to really see that inside of Allergan.

I think personally it's just about personal growth and intellectual challenge. I get plenty of that at work and plenty of that at home. And so I'm having a good time.


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