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Microsoft word - david pyott w dp approval last edit 1 15 13-2The Life Sciences Foundation
Oral History Program
Interview conducted by
Arnold Thackray, PhD
November 8, 2011
Copyright 2013 The Life Sciences Foundation
The Life Sciences Foundation
The Life Sciences Foundation (LSF) is a 501(c)(3) public charity headquartered in San Francisco, California. Its Board members are drawn from among industry leaders in biotechnology and life sciences, academic colleagues, and associated non-profits. LSF records, preserves and makes known the history of the life sciences and biotechnology. The Life Sciences Foundation One Embarcadero Center, 27th Floor San Francisco, CA, 94111 www.biotechhistory.org The Life Sciences Foundation Oral History Program
Oral histories are narrative accounts of events and historical processes as told from the points of view of participants, witnesses to history. They preserve the experiences, recollections, and testimonies of history-makers. LSF is assembling a virtual oral history archive – we are recording, transcribing, and publishing interviews with leading figures in the biosciences and the biotech industry. These documents contain stories about the history of biotechnology that have not yet been heard by scholars, journalists, and the general public. Biography—David Pyott
David Pyott was raised in India and Scotland. An early love of languages led him to work and study in mainland Europe, while pursuing a BA in German language and literature at the University of Edinburgh. Later, he added a diploma in European and International Law from the University of Amsterdam and an MBA from the London Business School. Pyott began his career in the City of London, handling German banking clients for Kleinwort Benson. He soon moved on to Switzerland, where he worked in the nutrition division of Sandoz (later Novartis, after merging with Ciba-Geigy). Various international postings followed before he joined Allergan in the United States in 1998, as President and CEO. Pyott now serves as Chairman of the Board, as well. In the last ten years, he has overseen the company’s growth in ‘medical aesthetics.’ Allergan’s Botox and Juvéderm products are important revenue generators alongside the company’s other specialty ophthalmic products which continue to enjoy great commercial success. Pyott is currently active on the boards of Edwards Lifesciences Corporation and Avery Dennison Corporation. He has also served as a director for the California Healthcare Initiative and the Biotechnology Industry Organization. He was honored in 2006 by Queen Elizabeth II and made a Commander of the British Empire for services to British business excellence in the United States. Recommended citation:
Pyott, David. “Adventures in International Business,” oral history conducted by Arnold
Thackray, November 8, 2011; ed. Gavin Rynne and Mark Jones (San Francisco, CA: The
Life Sciences Foundation, 2013).
Table of contents:
Family and Education: 1953 – 1980
Family background (1) – University, languages and European experiences (2) –
Working for Goodyear in Ohio (4) – Kleinwort Benson (5) – Pursuing an MBA (6) – First
marriage and leaving the United Kingdom (6).
Sandoz / Novartis: 1980-1997
Joining Sandoz (7) – Ovaltine in Malaysia (7) – Moving to Vienna (8) – Divorce and re-
marriage (8) – Being sent to Spain (9) – Moving to the United States (10) – Optifast (10) –
Returning to Europe: Switzerland (11) – Formation of Novartis (11) – Dissatisfaction
with job (11) – Desire to return to United States (11).
Interviewing for Allergan (12) – Initial impressions and plans for the company (12) –
Reducing general and administrative costs (15) – Alphagan® (16) – Identifying Botox®
as an opportunity (16) – Modernizing manufacturing (17) – Building a sales force (17) –
Investing in research and development (17) – Spinning off Advanced Medical Optics
(now Abbott) (18) – The growth of Botox (18) – Juvéderm® (19) – Acquiring Inamed (20)
– Coining the term ‘medical aesthetics’ (21) – 2008 recession (21) – Current research (22).
ORAL HISTORY PROGRAM
LOCATION: Irvine, California
DATE: November 8, 2011
ARNOLD THACKRAY: David, can you begin with your family, the time and circumstances? DAVID PYOTT: I narrowly missed being born an Indian. For a Scotsman it’s embarrassing to admit, but I landed on planet earth in London. I could well have landed in India instead. The reason was my father was a Scottish adventurer and spent most of his life overseas. He was in the sugar industry, both plantations and mills, for much of his life. He was a chemist—which might explain why I am not—and worked in what today we would call a microbiology lab. I’m not sure that word existed at the time. He immigrated to Argentina in the early 1920s, and returned to Britain during the Depression. I checked through the economic history books, and it’s all true. His best friend from school days, who lived in Greenock on the Firth of Clyde, moved out to India, and by snail-mail wrote to him, ’Come on out here. There is no recession.’ So, he ended up in India in 1933, and we didn’t finally leave until 1959. He witnessed everything during that period in Indian history. When I visited Hyderabad, I stayed at the Grand Hotel. I looked at all the sepia photographs with the maharajah on the walls there, wondered about those characters wearing Bombay shorts, and thought my dad could have been one among them. He was there through both partition and independence. I was almost seven years old when we returned to Scotland. I would say my time in India had two major effects on me. One—happily—was that it gave me the great capability of learning languages. As a young child, I learned Marathi. In terms of the film, Slumdog Millionaire, I came not quite from the millionaire side—but more that side than the slumdog side. The experience also gave me wanderlust. By the time I’d reached my teen years I had decided that, as much as I loved Scotland, I needed to get out. It was getting too claustrophobic. AT: You were born in London. Was that really just an accident? DP: No. Because my mother was English there was some relevance to it. As the British would say, she was a Kentish- maid—from the suburbs of London. AT: Where did your parents meet? DP: In Oxford, just after the war in 1948. Both of them liked tennis and that’s how they met. Her father had been managing director for Standard Telephones and Cables—for Americans, I like to say AT&T, by way of translation. He actually invented the Bakelite telephone, the old black plastic telephone. He traveled to the United States before the First World War to out-license the technology. So, I had a good dose of science from both sides of the family. Unhappily none of it rubbed off on me until much later. AT: When were you born? DP: In 1953. AT: So by now it was 1969 or so? DP: Right. I went to a very rigorous school. As a Brit you would understand that the Scots have Academies that are regarded as being fairly egalitarian. They’re not reserved for the rich. They’re more akin to an English grammar school. AT: Where in Scotland? DP: In Glasgow. I went to a day school there and had a very rigorous education. I advanced quickly. I could have gone to university, in theory, when I was just sixteen, but I didn’t so I needed to waste some time. We had a teacher with an English name, but at that time anybody who spoke several languages was regarded suspiciously, especially if they claimed to be English. He had jet-black hair and a Roman nose—I think he was Hungarian by origin and had changed his name. He shared with me his love of languages, and that helped me ‘waste’ my time more profitably in the two years before I went to university. I received intensive instruction in French and German, and acquired a pretty good vocabulary by the time I left the portals of Glasgow Academy. I then went off to Germany and worked in a bank. It was difficult getting a work permit, because this was prior to Britain’s accession to what was then the Common Market. Within two months, my latent knowledge of German had turned to active fluency. That set me off on another new journey. I returned to Edinburgh and studied German language and literature, which I found very tedious and boring. I did it purely for pragmatic reasons because the other part was called European Institutions. It was a mix of European and international law, economic history, and politics. I suppose it was similar to what Oxford would call PP&E [Politics, Philosophy and Economics]. In the middle year, I gained a scholarship to study at the University of Freiburg in the Black Forest. I’ve lived in ten countries and worked in seven. I guess I’ve had a pretty lucky life. And here I am now, sitting in this awful sunshine in Orange County! AT: It’s all downhill from here! DP: Yes, but somebody’s got to do it. So, anyway, I had two semesters paid for by the German government, through the German Academic Exchange Service (akin to the Fulbright program in the US). I studied politics and German constitutional law and wrote my dissertation, in German, on the evolution of the German constitution, post-1930, right up to the present day. I wrote about post-War reconstruction and the formation of West Germany. I discussed particularly what the British and American military forces wished to avoid repeating. AT: Who won out in that conversation, the British or the Germans? Or was it the United States? DP: That’s a very good question. I would say the American influence was greater than the British. I don’t think that was necessarily due to the Americans having more power or more votes. The French were also involved, to some degree, as the fourth power. Obviously, the Russians had no voice at all at that particular table. The aim was to ensure that there was no concentration of power, and to ensure that Germany became a federalist state. The United States obviously had a lot of practical experience with that kind of system. The British were rather centralist, notwithstanding the constituent parts that make up Great Britain. I returned to Edinburgh, and since then my life has been a progression of events in which the next opportunity has just kind of come along. It’s not that things have been handed to me on a silver platter. It’s been more a question of, ’Do you want to reach for this fruit and take it? Or would you rather do something else?’ My professor at the Edinburgh University law college realized what I liked. He said, ’Look, if you fancy it, you can go to study at either the Bruges College of Europe or the University of Amsterdam.’ Thank God I didn’t select Bruges. I might have been turned into a Eurocrat, which wouldn’t have suited my personality. I chose Amsterdam, which was a more exciting place, and got a diploma in European and international law in about twenty months. The course was taught in English, but I managed to learn Dutch to a reasonable degree. Beyond a certain level, Dutch gets quite difficult because it’s close to German. It’s rather like a mixture of German and English. Even today, my Dutch and Belgian colleagues know to be extremely careful what they say, especially about me! I can still understand Dutch, but it’s harder because I haven’t spoken it for some thirty-plus years. AT: Do you have any brothers or sisters? DP: Yes, I have a younger brother who, interestingly enough—considering my career—is an ophthalmologist. There are so few ophthalmologists in the United Kingdom and our name is extremely unusual – it’s Gaelic, an east-coast name from Dundee and Aberdeen – so people would often ask me, when I was the brand new CEO of Allergan, whether I had a younger brother. These days they don’t even ask, they just assume I’m that guy. But my brother tries to keep away from making any formulary decisions. He’s really quite socialist as well, so it makes it more painful for him. AT: The two of you had quite different trajectories. Were your parents content with where you were heading, given their background and their own experiences? DP: When I was growing up in Glasgow, I thought I would go into marketing or sales. I wanted to go into international business, which in those days would have been called something like ‘exports,’ and that’s where I ended up. Unfortunately, my father passed away when I was sixteen—just after I came back from Germany. My brother was only ten years old at the time. That was quite difficult. I rattled through as many scholarships as I was able to garner, whether it was the Germans paying for a year, or the Dutch paying for a year-and-a-half, or Her Majesty’s Government paying for three years. In Scotland, you qualified as a Master of Arts, which is sort of equivalent to a superb Bachelor of Arts you would be given in England. We have one year of school less than a typical grammar school, but another year at university in the end, so everyone comes out the other end more or less in the same place. Actually, the whole story shows my rebel background. My tutor, the linguist, had determined that I was going to study at Oxford, but he hadn’t consulted me. Unfortunately for him, I was influenced by the wave of Scottish nationalism at the time. I told him, ’Sorry, Mr. Varley, but I have to disappoint you. I’m not going.’ He was a little aghast, and said, ’There have been only two people to do this to me in the thirty years I have taught at this school.’ Bless his heart because he then tutored me anyway for the Edinburgh entrance exams so I could win a bursary, although for the school, it was more about the honor than the money. But that was fine. As I think about my life, the word ’rebel’ comes to mind. It might be because I’ve always been a little bit of an outsider or a minority. I’ve always led a very international life. Because I’d already worked in Germany, pre-university, it was quite easy for me to get jobs abroad—as an intern, to use an American term – while I was a student. Between my first and second years, I worked at an Austrian bank. They said, ’My goodness, you’ve already worked in a German bank, and you speak fluent German.’ It wasn’t exactly a huge risk or leap of faith on their part. The following year was interesting. I had a lot of American friends at Edinburgh University. At that time, 10 percent of the student population was foreign students, and Americans made up half of that because they could afford the tuition. Most of the rest came from the Commonwealth, with some kind of British-assisted scholarship. It all makes eminent sense, looking back. One of my American friends said that there had been a wonderful sort of accident in British-American history. I don’t know if it still exists but between two dates, I think Memorial Day and Labor Day, we, as Brits, could work without a special visa or work permit in the United States. Americans could work in Britain under similar terms. Of course, most Americans weren’t stupid enough to want to work in Britain given the unfavorable currency exchange rate at the time. In any event, you needed just to show your passport and announce what you were planning to do. I ended up in Akron, Ohio, of all places, which at that time was a very industrial city. I remember arriving on a very hot summer day and feeling a bit nauseous from the smell of rubber in the air. I ended up working at Goodyear. Initially, I worked in the company bank. Looking back, I see that it was a very clever way for the company to hang on to the payroll a little longer inside its own system. I got started and it wasn’t long before the fellow who had interviewed me had me brought up to his office. I thought, ‘My Lord, what have I done wrong?’ But he said, ‘Your talent is wasted here. My friend is the assistant controller of Goodyear, and you’re probably just the person for him. Go over, talk to him, and sort it all out. I’m not going to get in the way if you’re needed.’ I made the move and ended up doing some very interesting work. I analyzed the financial flows of every single division, subsidiary, and entity encompassed by Goodyear Tire. It took me about six or seven weeks. Remember, I wasn’t yet even twenty-one years old. Americans would call this resume building, but for me it was back to the silver platter– ‘Would you like to do this?’ Pass go, pick up the money, and have fun while you’re at it! After the Goodyear experience, I returned to Germany, right in the middle of the oil crisis. Then it was back to the United Kingdom, and later Holland to get the degree for the course I described earlier. Finally, I returned to Britain and worked in the City of London for Kleinwort Benson. Most of our clients were either West German corporations, or, significantly, East German trading houses. I had to travel to Leipzig a lot in those days, and would sometimes sweat bullets. When I went out walking on my own, it was pretty damned obvious to the locals that I had Western clothes. Looking back, when I engaged people in conversation, they must have thought I was the closest thing to MI5 they’d ever seen. I spoke almost-perfect German and wore Western clothes—something must be wrong. I was always happy to get out again without being arrested by the Stasi. AT: When did you work in London? DP: From 1975 to 1978. I didn’t like being a banker, actually. I think, intellectually, banking is a very interesting industry, but it would be much more fun to start as a vice-president or director, in terms of the challenge. Workers in my department were called ‘the dogs,’ literally; we were clerks, paper-pushers. It was extremely repetitive. They very quickly made me the bug-hunter because the accounts get screwed up. It doesn’t take long before you understand how fast things can get convoluted. AT: You could find the missing $600 million? DP: Yeah, maybe, but I usually found the system’s weaknesses. I spent a lot of time going through the files, or digging through microfilm, which was the technology at that time. I learned how the system worked, and that was the only shot of life in what was a pretty dull activity. Anyway, I got out of that by doing what a lot of people do: I pursued an MBA. I call it a good way to re-vulcanize yourself and come out with a new profile. I went to the London Business School. It was still quite small then, only a hundred students or so. AT: It was fairly new. DP: It was 1978. It was only twelve years old. It was still very much a school on the rise. I take great pleasure that it’s often ranked number-one in the world these days, even ahead of Harvard in a good year. It’s consistently in the top five, which is due to the quality of the faculty. AT: And also location, location, location. DP: Of course. Once again I was studying something completely different. I panicked a little though when I was told that my Scottish ‘Higher’ in mathematics was not up to the standard of an English A-level. I was accepted, conditionally on passing a pre-math course. I was really convinced that I was relatively innumerate, due to being a linguist. But I’ve become infamous, whether at Novartis in Switzerland, or here on the various boards I sit on, because I can look at numbers and see something wrong with them. Even mathematically proficient people have had to say, 'The boss is right. I didn’t see it.’ Despite my belief that I was innumerate, I discovered I’m not innumerate at all. That marked the end of what I call the ’higher-education time.’ Seven years, happily all paid for by somebody else. I managed to stay relatively debt-free. AT: And you got a real education. DP: Yes, very broad, and in many different places. To be setting off on the journey of doing something productive in an industrial organization, it was pretty good preparation. I met my first wife after finishing school, while I was on my way to do the Haute-Route, from Chamonix to Zermatt on skis. I was travelling through Geneva and we ended up staying in the same hostel. The rest, as they say, is history. She was French-Swiss and German-Swiss. Her name was Dominique. She was a great linguist. She would joke around and say her mother tongue was French, her father tongue was Swiss-German – although her German was very good – and her married tongue was English. She also spoke Italian. She came to live with me in London for a while, but when I graduated from London Business School, Britain’s economy was going down in a bad, bad way. I was very critical of it, after having worked in what I considered productive societies like Germany, Austria, and America and I decided I wasn’t going to stay in what I viewed as a low-wage, class-warfare society. Thatcher was taking on the unions at that time. I remember having to walk to work many times during the London tube strikes and British Rail strikes. I thought, ’Okay, if you’ve got to escape, Switzerland isn’t a bad place.’ We ended up living in Biel in the canton of Berne. I applied to all sorts of different companies and ended up working in a division of Sandoz called Wander, as in wandering around. It was the corporation’s nutrition division. Like most MBAs, I started as a strategic planner or something like that. Looking back, my boss didn’t have a job for me at all. I think he created one when I walked through the door. I’ve known him for a long time, we’re still in touch. He was a great opportunist, an instinctive leader, and also a very tough guy. He was part-time because, like many Swiss executives, he was also a colonel of a Swiss regiment. I like to tell a funny story about the trouble I had getting my work typed. The secretary, who was Italian—an Austrian, really, from South Tyrol—would tell me my memo couldn’t get typed for three days. I would ask why and she would pull out a drawer with all of these cards in it and say, ’The boss is mobilizing his regiment and this has to be done immediately!’ I had a good laugh about that. Protection of the Swiss Confederation was more important than my memo. My next job was with a Swiss-American who had just gotten back from working in the United States. He appointed me product manager of Ovaltine®, which was the most important product in his division. It was a high-profile job and I was aghast because I was the new kid, only twenty-eight-years-old. Still, to me, it was just another stepping stone. After a bit, I said, ’Look, I have to get out, into a line job.’ The biggest market in the world for Ovaltine at that time was Switzerland—tiny country, huge consumption. Whenever we went to ski resorts, I’d see it prominently displayed as ’Ovomaltine.’ The market was also huge in Southeast Asia, so I went to Malaysia. We had lost a huge amount of market share to Nestlé that was selling a very similar chocolate-malt product called Milo. That was the first time I had to employ guerilla business tactics. When I was sent from Switzerland, they told me I had a 10 percent market share. I believed that because I had been in the division checking all of this stuff. One of the competitors was Beecham’s Horlicks®, a malted beverage without the chocolate. We called it the albino version of Ovaltine. It appealed to a different consumer group because most people liked the chocolate. In fact, the market was divided largely along ethnic lines. Indian-Malaysians consumed more Horlicks than the Chinese or the Malays. Through my tactics and the help of a really good distributor, I jacked up the tonnage 50 percent in two-and-a-half years. I really enjoyed myself in Malaysia and Singapore during that period. The post-colonial era was coming to an end and Malaysia was about to burst forward. The ex-pats all complained that the people back at their head offices, whether it was in London, Basel, Cincinnati, or New York, didn’t understand that this place was about to take-off. For my pains—for moving the needle so much, as I like to say—I was transferred to the ‘Eastern Front.’ It was a ‘miserable place’ in my legacy of traveling: Vienna, Austria. You can see what a tough life I had! Of course, years later, coming to California and meeting our ex-Governor, when he was just a movie star, I joked with Arnold, ’Your big break was here? Mine was in Austria!’ Vienna was my first job with the title of general manager. I was thirty-two-years-old. It was a very small country, so even if I had royally screwed up, frankly, Sandoz given its scale, could have handled that. At this point, Ovaltine had beaten out the competition and was the leading malt and chocolate product in Austria. There was very high consumption wherever the Swiss air had penetrated. AT: I think of it as a very British drink. DP: Absolutely. In the beginning even I denied that it was Swiss. It’s so British, for God’s sake, as the British had exported Ovaltine throughout the British Commonwealth and colonies from the early 1900s. These days, in most countries, it belongs to Associated British Foods, which is a twist of fate in corporate ownership. That product line was all consumer-based, but by that time I also had Wasa crisp bread, which you can find in this country, too. That was my entrée into hospital products and enteral nutrition—tube-feeding. We also distributed After Eight chocolate mints in Austria for a little company called Rowntree Mackintosh, and increased sales of that product. One day, I received a fax, in that pre-email era, congratulating me for exceeding the per-capita tonnage in the UK. Clearly, I knew something about marketing and selling. What I learned in the Austrian experience was niche marketing, the power of distribution, and the power of a sales force. During the four years I was there, a fairly unusual occurrence in consumer goods, I doubled sales. I loved Vienna. I doubled the size of the subsidiary, and naively thought, ‘This is great.’ My Swiss wife had loved Malaysia, but disliked Austria. She said, ’I’m going back to Switzerland,’ and left me. Later, I went on holiday to a Turkish resort on the Mediterranean with my son. There, I met a woman who was also traveling with her son. I was speaking German, coming from Vienna, and she was a German speaker although born in Hungary. Her name was Julianna. She was a very interesting person, of ethnic German origin, although when you looked at her facial features, you realized there were a couple of Hungarians hidden in that gene pool. She had incredibly high cheekbones and blue eyes. Both of us spoke German and she thought Austria was much better than ’wife number one’ had. At ten-years-old, in 1963, right in the middle of the Cold War, her family decamped from Hungary to Germany. Along with her parents and brother, she became a refugee. With two kids and two suitcases, her parents left to start over again. She likes to tell me she’s the perfect wife for a Scotsman because for her, coming from that background, the thought of wasting money is terrible. I like to say that I sent her to spending classes but she’s still not very good at it. Most of my friends look at me in awe and say, ’I sent my wife to the opposite class.’ There we were in a wonderful apartment overlooking the woods near Vienna. On the balcony was a little palm tree I had bought, so we called that corner ’Las Palmas.’ But two weeks later, I was recalled, like the ambassador, to a conference in Switzerland. By this stage, I was able to work out the patter, so I knew something was going on. The conversation moved very quickly to Spain. There was this fellow in the room, whose nickname was Rasputin, so you had to be a little careful, right? He said that the next job was in Spain. I said, ’Well, I’m not really sure you checked my personnel file carefully because I don’t speak Spanish.’ I could say amigo, playa, cerveza, and that was it. So we had to learn Spanish in less than six months, at the Berlitz School. English with its Roman connections gives you a head start, compared to Hungarian or German. While we were trying to learn Spanish, we went on holiday to Cyprus. At the swimming pool every day we had our headsets on with these books. We met an English gentleman and struck up a conversation. He said, ’If you don’t mind me saying so, you have a marvelous command of the English language.’ To which I replied, ’Give me a break, I’m from Glasgow!’ He then said, ’What, you’re not German?’ He had heard me speaking German for four days, so it made sense. He said, 'You obviously have a love of Spanish language and culture. Why are you on holiday in Cyprus?’ I said, ’That’s a whole other story.’ The job was in Barcelona and we had a wonderful time there. It was hugely enriching, much like my Asian adventures. I was a true Northern European. I had spent my whole life in the North and understood it. This was a great opportunity to understand ‘Latin’ or Southern European culture. The Spanish in particular are very hardworking people, extremely disciplined, but if you don’t motivate them the right way, you might as well try to herd fifty sheep through a fenceless field. You have to lead in a certain way, and it’s not by Germanic methods. Sandoz’ biggest business in Spain at that time was infant formula. It was all about cleverly tweaking ingredients and turning those into medical messages of meaning to the pediatrician. The enteral nutrition business, with which I had become familiar in Austria, was the other big piece. Spain was the biggest market we had in Europe, in fact. I exceeded the sales of our German subsidiary much to their irritation. We had a very high market share in Spain. There was also another consumer brand that I haven’t mentioned yet – Isostar®, the European version of Gatorade®. I realized I wasn’t going to be in Spain forever. My next obvious transition was to move to a position in Germany. It was the biggest market in Europe and a good fit given my background. Of course, once again I got the phone call to come to Basel. The talk turned to America and I asked, ’What has this got to do with me?’ By that time, my daughter from my second marriage had been born. She narrowly missed being a Spaniard. Luckily, it was the middle of winter and only a one-hour plane ride to Munich – if you grew up in Bavaria, as my wife did, Munich is the center of the universe. My two sons from my previous marriage lived in Switzerland and Bavaria. I had expected a posting in Germany, but we were suddenly faced with moving to the United States. It was a tough decision, but once I got my mind around it, I began to get through it. Actually, the two older boys loved coming to visit us in Minnesota. AT: When was this? DP: It was 1992. We left Barcelona two weeks after the Olympics ended; it’s an easy date to remember. When they asked me to go to the United States the business there was a mess. It was a poorly-managed subsidiary. The big businesses were again enteral nutrition for hospitals, nursing homes, and a food service line. The reason it had gone from riches back to rags was due to a slimming product called Optifast®. This was a very low-calorie diet product, under four-hundred calories per day, under medical, hospital-based supervision. It really took off thanks to our friend Oprah Winfrey. Someone had said on her program, ’Oprah, you’re looking great. What are you doing?’ She said, ’I’m on the Optifast program.’ Sales then went from $30 million to something like $120 million, in a year and a bit. Of course, when you expand that fast, you can lose control of quality. Then unfortunately, Oprah started putting on weight again and, as with all slimming products, it’s not the consumer who’s at fault in the public mind, it’s the product. It’s ironic that now, at Allergan, one of our products is the Lap Band®. It’s the great circle of life. I like to remind the Allergan people that had it not been for Optifast and Oprah’s yo-yo dieting, I probably wouldn’t be sitting here. AT: What was your title when you came? DP: I was president and CEO of Sandoz Nutrition Corporation in Minneapolis. That’s where my fourth son was born, as an American. It’s lots of fun these days to say, ’Here I am, my wife is German, my stepson is German, the next one is Swiss, the following one is German, and the last is American.’ This is all very disturbing for a Commander of the British Empire! I did that job for a couple of years. Then my old boss, the man who opportunistically hired me in Switzerland in 1980, had gone off to run dye-stuffs for the chemical division, and had been promoted to CEO of all of Sandoz, invited me to dinner. By the end of the dinner, it was very clear that I had my next offer on the table. My wife wasn’t happy about it. She didn’t like Switzerland, even before she’d gone there. Years later, I was sitting with my good friend Raymond Breu, who was the CFO of Sandoz and then Novartis. He made comments about Germany. The Swiss like to pontificate about Germany sometimes. It’s like over here, when Canadians say, ’We understand America better than the Americans.’ Well, I don’t think so. I pointed out, ’How many of you gentlemen have lived in Switzerland, Austria, and Germany twice, each?’ To which Raymond said, ‘Bloody Scotsman!’ By then I had seen many, many different products and market situations, with high market share and low market share. I’d learned how to continue to innovate successfully in Spain. I’d turned around a basket-case division in the United States. Happily for me, I always say that the two-and-a-half years in Switzerland were in some ways the best and worst years of my career. They were the best because I was catapulted into running an entire division. I was only the second non-Swiss in 125 years to be appointed to what the Swiss called the executive board, as opposed to the supervisory board. But six months later, the unthinkable happened. There was a merger between Sandoz and Ciba-Geigy, to form Novartis. Mine was one of the few non-affected divisions on the nutrition side. I had moved up the equivalent of the naval ranks rather quickly, up to the bridge of the damn battleship. I discovered that I didn’t really like being a battleship commander in the slightest. It was so bureaucratic and inward looking, with too much infighting and second-guessing. I realized, sticking to the naval analogy, that I was really a destroyer captain. I liked doing things quickly and decisively. Maybe you could get me up to a cruiser, but after that I may think things are getting a little sluggish. I was very quickly frustrated by the bureaucracy. I thought that I knew the company well and could maneuver a bit, but it was very, very frustrating. I soon realized I was running a low-growth division. In that period, pharma was still golden and I wanted to get out. My wife did not like Switzerland, and we had both really enjoyed life in the United States, so we were thinking about how to get back. This was when I began checking around, albeit discreetly, because if the Swiss found out you were talking to anybody you could be on a one-way ticket out. We took an Easter holiday in California, with the children who were then three and five. When we checked into the hotel in Napa Valley, I received a note from a headhunter I had known in Minneapolis, Russell Reynolds. Our room wasn’t ready, and in those days before cellphones, I had a little trouble finding a telephone where I could conduct business discreetly. You should understand that the Swiss are very leery of people exploring other opportunities. Russell told me about this company in Irvine called Allergan. I knew Irvine and had been there once. He described Allergan as a company with very specialized businesses. He spoke about ophthalmology, both pharmaceuticals and lens-care solutions, also ophthalmic-surgery products. I liked the fact that it was niche-specialized. My first instinct told me to pursue it. It sounded interesting. The idea of a specialized global company looking for its third CEO sounded very good. Of course, it then turned into a long series of interviews that felt like they lasted forever. In reality, it was six months. I was curious as to why these interviews just went on and on and on. The first one was in New York with Bill Grant, the lead director and Bill Shepherd, my predecessor. I had to sneak out of the Sandoz board meeting in New York for it, making absolutely sure no one was on my tail. I disappeared into the Helmsley Building, of all places, right there on Park Avenue. The next interview was with Henry Wendt, the former CEO of SmithKlineBeecham and Handel Evans, a Welshman and founder of IMS, [IMS International Inc] at a hotel very close to Heathrow. I missed my flight back to Switzerland, so they asked me to join them for dinner. I took this as a positive sign that they wanted to invest more time in me. It was somewhat social, with their wives, so I thought it was a selling opportunity, in a quiet way. The next interview was back here, and so it went. It took from April until mid-September, before I saw the contract sputtering out of the fax machine. It felt really good. It then took another three months to escape from Novartis because under a Swiss contract, a year is considered proper notice. I was curious as to what they would do with me. In the end, though, I was sent on a kind of ’garden-leave.’ It was a one-way ticket from Zurich to LAX, on December 30, 1997. A few hours after we arrived we took the kids down to Balboa Island. They have these crazy Christmas decorations, with Santa and reindeers going around the roofs. For the kids, it was like we had just arrived from Siberia. They were saying, ’This isn’t like Switzerland.’ I said, ’No, this is California. It’s a bit crazier.’ It was great, and marked the tenor of the transition. At the beginning the company was not doing so well. There had been maybe a couple of percentage points of growth from 1993 to 1997. Although genericization occurred at a slower rate then, they had still lost a lot of sales of ophthalmic products that people had never thought would be made as generics. There is a rule of thumb which says you can lose 80 percent in three months; back then, it might have been 80 percent in three years, looking back that seems quite humane. So that was the reason this company was looking externally for its third CEO. I was very impressed when I started reading about the board since there was a lot of talent. At the top of the list would be Henry Wendt, particularly because he had written this book called The Global Embrace. Henry Wendt received the Order of the Rising Sun from Japan for setting up SmithKline. There’s a photo of him sitting cross-legged in the yearbook, if you want to have some fun. He also has a CBE from the United Kingdom. I had thought he was an unusual, interesting kind of person and that was totally confirmed when I actually met him. Wendt was the chair of the governance committee. Bill Grant was another of the committee chairs. He was the chair of audit and finance which I think was due to his very internationalist outlook. Although he lived most of his life in the United States and California, he was also a traveler. Handel Evans was a very influential person too. All had served on the SmithKline Board together. Later on, people would say, ’Watch out for the SmithKliners. They can cause you trouble.’ They never did, I found them the most pleasant, direct, and thoughtful leaders that one could wish for. The advent of the contact lens solution business caused Allergan to become well known. During the seventies and eighties, Gavin Herbert, the founder of Allergan, had invented the hydrogen peroxide solution for disinfecting RGP [rapid gas permeable] or hard lenses. In the United States, we were somewhat slow to see the arrival of the one-bottle cleaner, with the start of soft contact lenses. But in Europe, because we had the benefit of observing what had occurred in the US, we were off and running quicker and still commanded a leading share in the 1990s. Also in that period we acquired a business from Pilkington, Barnes, Hind which allowed us to become market leaders in Japan. In the US, the company never recovered and is number three in the marketplace (now, after the spinoff, as Abbott Medical Optics). I asked the headhunter, Russell Reynolds, how I came to be a serious candidate for the CEO position, since I had never sold a drug in my life. I was just a nutrition and consumer guy. What got me through the door, so to speak, was a connection to one part of the business, although I think everybody, including me, understood that it would be a smaller part in the future. Then there was my international experience, which appealed very much, particularly to the subset of the board I referred to. Thirdly, I was able to tell them that I had done quite a few turnarounds in a different field. I had been the Red Adair of Sandoz, wherever the fire was burning was where I used to get dispatched. I believe it was unanimous, but I never asked. I never knew if anybody was coughing up blood, thinking, ’This guy is an absolute dunce,’ although they were quizzing me about how I would ever learn the pharmaceutical business. AT: Gavin was referring to the other side of that coin when he said, ’How can we hire someone who isn't from pharma?’ DP: Yes, he was quite skeptical. I think to be fair to Gavin, it wasn't all that apparent in the first month or two. As I said, my first job was to get things moving again. With the benefit of hindsight, if I had been a bad choice, or if things hadn't worked out, I don’t believe Allergan would be the independent company it is today. It would belong to somebody else. AT: Does SmithKline still own a significant fraction? DP: No, it's totally separate. It was a complete tax-free spinoff in 1989. AT: So the people from SmithKline on the board were just there for the sake of continuity. DP: Yes, and also because of friendship with Gavin. In fact, those people had already resigned from the SmithKline board so there was no corporate link at all. They too had already become another company, GlaxoSmithKline. AT: Yes. So how did you get the ship moving? DP: During the interview process I had already read every scrap of paper there was to read about Allergan, as is my way, including all the public filings. I wanted them to know that I had done my homework. Things were already clear to me on day one. I had even had some strange visits to Allergan and attended some budget meetings, for instance, during my ‘garden leave’ even though I was still a corporate officer of Novartis—I had assured them I would never do anything against their interests. I could see there was a lot of bureaucracy here in the corporate headquarters. One of the first things I knew I had to do was dramatically shrink Irvine down to a faster, more entrepreneurial company. I could see there was discord within the executive committee. I could spot that from the outside, and from some of my visits. I took a different approach. I asked, ’Who are the smart, ‘Young Turks’ here?’ and then said, ’If you don't mind I'd like to see what kind of ideas are bottling up in the sort of middle decks of the ship.’ I was sure some people thought this was the worst idea ever, but how could they tell me no? I sat down with each of them individually and asked, ’What are the exciting things here that could result in a product or growth opportunity?’ I knew I had to get the place growing. From those conversations at least ten of those people are rich and half of them are still here, fifteen years later. I heard people who were going in completely different directions. That told me a lot, as well. I thought, first of all, that it needed a major purge to slim the place down. Then I realized after a bit, as Jack Welch would have said, that structure follows strategy. Firstly, I had to reaffirm what were the strategies and priorities. I told the board I wasn't really a big fan of management consultants but that I needed a short period of assistance from a neutral party that brought discipline. I thought McKinsey was a little too invested in Novartis for my liking, but having worked at Bain myself I realized that management consultants have their purpose. I got the name of the local partner and she came in during week three. The board approved and at their meeting in late April, four months after I had started, we presented the strategy, which was actually just Gavin's old strategy. Looking back, it was all about focusing on just a few specialties and surrounding the customer with products and services. We had a color chart with the customer surrounded by differentiated products. This had been Gavin's strategy since the fifties, particularly for ophthalmology. Because I'm a marketing guy, I try to come up with phrases that will catch people's attention. Like Indiana Jones, it's the journey back to the future or, if you prefer, the new Allergan is the restoration of the old Allergan. You can choose. Barring the people who didn't want to work hard, most of the old hands thought that this was great. There were a few who thought I was the worst thing ever to have happened and who started self-selecting out. Mostly the new-hands said, ’This guy must have some kind of agenda. This isn't a compass spinning in circles. We're all going in one direction now.’ I then went back to my first thought which was the need to make dramatic cuts in the overhead costs. I had my McKinsey henchman at my side because I needed a little intellectual support. Making jokes about my ethnic origins at that point was also useful. I told the assembled work team, ‘It's quite simple, gentlemen. I'm looking for a 33 percent cut in G&A [general and administrative] costs, worldwide,’ at which a couple of them rapidly turned a whiter shade of pale. They knew I meant business. I had noted the yo-yo dieting of my predecessor, there’d been cuts, maybe of 12 percent, and then when nobody was looking, it all went straight back again. You always have to ask for more to get what you need. When the books were closed on that project, we’d reduced worldwide costs by 22 percent. That was about $60 million. Some skeptics said, ’This Scotsman is going to run this place into the ground for the future.’ They thought I was preparing the company for sale to enrich myself with the stock options. This wasn’t the prevailing point of view, just of the 10 percent who were not very happy. I was forty-four then and early retirement at fifty was an alien concept but as I thought about it, I realized it was a really good idea. So we said, ’If you have been around for ten years, at fifty, we’ll make a huge exception as to who can leave with early retirement benefits.’ The exodus of vice-presidents was quite high. But when you considered the severity of the cut, it doesn’t help to fire the gardeners. You might get to the headcount but you don’t get to the money. There was also a hidden agenda that those who were close to me understood. I just talked to my ex-general counsel, who now runs Europe, Doug Ingram. He was the brilliant guy who suggested suing both the FDA and the DOJ over restriction of our rights under the first amendment of the US Constitution when we were at dispute with the Government regarding the then alleged off-label promotion of Botox®. He said, ’I still remember in the first months after you arrived you said, ‘Allergan is just a very small company compared to where I come from, Novartis. The only way we can prosper is to be faster than our big pharma brethren.’’ Due to our benchmarking nonsense, and emulation, Allergan had cloned itself into a big pharma company which it wasn’t. It was just this nasty little company then. As we cast off the layers and the number of people who worked on things, the speed increased geometrically. People realized that I made decisions really quickly, once the homework had been done. In the first quarter, I put the hammer down very hard on costs. I remember the ex-controller coming to me, red-eyed and in a sweat, saying, ’Mr. Pyott, we’re going to have a problem.’ I said, ’What is it?’ He said, ’The money is just pouring out of the ground. If only we had oil barrels, we could collect it all, and dispose of it.’ We blew out the earnings in the first quarter after I was hired. We had to decide what we wanted to concentrate on. There were a couple of new things that had just been launched. However, people were very depressed about Alphagan® because its label read, ’Instill three times a day.’ Everyone was shaking their heads, saying, ’How do you sell a drop that says to instill three times a day, when Xalatan® is once and Cosopt® is twice? It’s a dead duck.’ I said, ’We don’t have much else.’ We created the data set to show how, in practice, practitioners could use it BID [twice daily]. Maybe today it would have been more difficult with the FDA, but the science was well understood and globally the first version of Alphagan was labeled BID ex-US. So we said, OK, shoulder to the wheel, we need to put all of our resources behind the new glaucoma drop, Alphagan. I saw that we could be the world leader in tears, with the Refresh® brand, and that appealed to my consumer marketing knowledge. I was sure we could blow the dust off it, put it in a neat package, and give it a new campaign. Then there was Tazorac® for psoriasis, an extremely irritating product that had been mis-marketed. Gavin was incredibly frustrated about it. He used to come in shouting and very upset, and rightfully so. The third thing, which was the most important of all but wasn’t new, was this weird product called Botox. I call it the most important because when I asked everyone, ’Where is the opportunity?’ They replied, ’It’s Botox. It just hasn’t been resourced properly.’ I inherited $80 million in sales, and this year it is $1.8 billion. It’s been a fun journey. That was how the strategy was aligned to give people hope that the new Allergan was being restored to its former glory. I used to say it was a little bit like Cinderella: you just needed to give the Allergan girl a good bath and some new clothes, and she was actually really beautiful. Most people had just not seen it. I have the sales graph for that year. We poured money into sales and marketing, from the savings we’d made and sales went up 15 percent that year. People were saying, ‘This is fantastic.’ They had been so despondent, with almost no growth and now it was fun again. We continued to drive down costs and got the G&A costs down to about 7 percent of sales, which is quite low by industry standards. We also had all of these funny little plants that had been acquired, that didn’t make sense but fortunately we had a very good head of manufacturing person, Jackie Schiavo, whose nickname was Madame Fermée. We disposed of five little plants in the course of about eighteen months. It didn’t save tens of millions of dollars, but it was enough of a demonstration so that today we have just five manufacturing facilities for a company that now has, compared to those days, 10X in revenues. She used to like to say, ’With so few plants, David, they’d better be damn good.’ I would say, ’Precisely, Jackie. Would you work on that?’ When I visited our plant in Westport, Ireland for the first time, the production lines reminded me of fruit packing because of all the manual labor. I started doing the back-of-the-envelope calculation. Things got changed. The last time I was there I had never seen that level of automation at a pharmaceutical plant. Gavin was very proud of Westport too. There was just a fantastic level of ability, speed, and control. It makes sense - we are the world’s largest producer of ophthalmic drugs on this scale. Why wouldn’t we have the best equipment and the best technical expertise out there? It took a while but way back in the beginning, people really got the point. Once we had started to make some money, I was prepared to spend some. The first area that needed investment was our sales force. In that first year I went to Mike Ball who now runs Hospira. He had worked at Lilly, Syntex, and Roche before joining Allergan. I said, ’Mike, I’m just a little nutrition guy, and you’re the real pharma sales and marketing guru. If I look at all the big pharma companies, they expanded their sales forces long ago. We only have one-hundred reps for ophthalmology in the United States. If we had two hundred, what would happen?’ He did the math and of course that’s what happened very quickly. Taking US ophthalmology, we went from one-hundred reps to a sales group of six hundred. We have a few more products, of course, but we needed them. This wasn’t just because I like sales reps. I like sales reps because they can sell more. Then, close to the end of that first year, having effectively got the plane going down the runway—we were in the air again, climbing quite rapidly—I said, ’Okay, now we’re going for the long swing. We need to start moving R&D because we need a future.’ Here are the numbers. In the previous year, 1997, R&D expenditure was about $85 million. But then we started cranking up the R&D in a very, very big way. If someone had told me that a decade and a half on we’d be spending over $1 billion, I would have told them they needed drugs for some sort of psychotic condition. Never here, right? So that was the 1998-1999 period, when we got this ship really moving again. And you can see that it worked rather well. The next chapter involved taking stock and cleaning out some ‘ghost units.' In the spring of 2000, the CFO, Eric Brandt, who had come from The Boston Consulting Group, and who is now CFO of Broadcom, came to me. He said, ’I think we need to get rid of this lens care solutions business, which is only growing by a couple of percent.’ Hydrogen peroxide had largely been replaced by the new cleaners—the disinfectants. They were more efficient than the old ones, which isn’t good if you’re trying to sell the old stuff. The pharma business was growing by double-digit percentage points but the lens care solutions business was only growing by a couple of percent. The intraocular cataract lenses were a bit better, as I remember, but that too was only mid-single-digit. It was like going to an Oxford-Cambridge boat race, throwing a bucket out of the back, and wondering why the team’s rowing so damn hard to try to keep up. We conducted an investigation into whether we could sell the business. But we didn’t think we’d do well in terms of price and we were also a bit nervous about strengthening some of our competitors against ourselves. We settled on the idea of the spinoff, which was interesting given that Allergan itself had been freed from SmithKline during the merger with Beecham. Gavin came into my office and asked, ‘What are you thinking about right now? What are you working on?’ When I told him we were considering a spinoff I didn’t quite get myself fired, but if he had been Harry Potter, I’d have been turned into a mouse. He tried to disguise his distaste for the idea but it took about three more board meetings for Gavin to sort of croak an ’aye’ and make it a unanimous decision. We had an organizational matrix where people had not only regional responsibilities but also global-oversight roles for a part of the business. Mike Ball, as the consummate pharma guy running North America, was responsible for ophthalmic pharmaceutical products worldwide. Jim Mazzo came straight from college to Allergan, and had done everything. He had been all over the place. I had previously asked him to take charge of Europe and also surgical products worldwide and he had done a good job. With the help of some of our board members, such as Lou Rosso, then CEO of Beckman Coulter which had also been spun off from SmithKline in the wake of the merger with Beecham, we convinced Jim, after twenty years of service at Allergan, to set up his own shop, Advanced Medical Optics. It did quite well for a few years, especially as he was able to acquire some laser refractive businesses which would not have made sense for Allergan but were core to AMO. AMO was bought by Abbott and is now known as Abbott Medical Optics. On the Allergan side, we knew after the spinoff that we were valued as a growth stock. Today, our price-to-earnings [PE] ratio is twenty-one times so, apart from Novo Nordisk, we have the highest ratio in the whole pharmaceutical industry, or certainly, at least, for any company larger than a three or four billion dollar market cap. When I joined the company, the PE was awful – eleven, perhaps – and the rest of the industry was about twenty. Of course, now big pharma is down in that zone and we came out the other way. So there’s been huge growth, thanks to a lot of great people. I had to prove myself at first. I’m sure some of the people here thought, ‘OK, you’re this Ovaltine guy—what are you going to do for us?’ But pretty quickly they said, ’He’s doing OK so far for a weird Scottish guy who understands Ovaltine, infant formula, and Gerber® baby food!’ The decade of 2000 to 2010, has been about the enormous takeoff of Botox. We’ve had one indication after another approved. There are twenty-six different indications, worldwide. Some are micro-indications like with anal fissures, where it wouldn’t be worth pursuing the indication with the FDA, but it’s in every compendia. You can just look it up. Obviously we can’t talk about it but people know. Botox Cosmetic gained approval from the FDA, on tax day, April 15, 2002. I’d say that was the best tax day ever, both personally and corporately. We clearly had enormous growth on the therapeutic side in the early period, but we only had a small sales team. I said, ’Twenty salespeople for the United States? Are you joking? Are we serious?’ I believe in doing things properly. We had good early growth from the use of Botox to treat cervical dystonia, blepharospam and strabismus. Gavin was really invested in this business during the nineties. He bought this company called Oculinum from an ophthalmologist up in San Francisco. The company had sales of $5 million for one year -I get sweaty if I don’t do that in one day! Luckily Botox is approved for hyperhidrosis so I can cure that! But there was a sense that Botox wasn’t being taken seriously. After all, here was this drug for wrinkles. My view is if anything is ethical and it works, then you should go for it. Already, in 1998, I began to lean heavily on R&D, telling them they needed to talk to the FDA. It was beginning to take off. Looking back, it was very clear that we and the FDA had the same goal. They knew this thing was growing like a weed and it was better to have something on–label and regulated so we could teach doctors how to inject it properly. They agreed to the trial, which we devised. It was not that difficult to design. Finding Botox Cosmetic volunteers to participate in the trial was not the most challenging recruitment exercise we have ever had either! If you talk to dermatologists and plastic surgeons, they will tell you it changed their lives, unless they are committed to doing only medical dermatology. By 2003, the same people would tell you they had stopped taking insurance. They didn’t need to mess with insurance. These procedures were cash-paid. Then the next idea came along. In late 2005 or 2006, it became clear to me that Botox for facial use is from the nose-line-up and dermal fillers are for the nose-line down. We started looking around the world to buy a dermal filler, or get access to one. Around the time of the AMO spinoff, the Swedes had tried to contact me to become the licensee in the United States for Restylane®, which at that time was the world leader. Because our rationale for the spinoff was to create a pharma-only company and to get out of devices, I found myself kind of saying, ’Ouch, I spoke with forked tongue.’ So we sent them off and they found another company that today is our competitor. We kept scouring the world but we always came back to the same product, from a company in France called Corneal. Hyaluronic acid is used for cataract surgery. It’s used by Genzyme for injecting into the knee, and is also used for dermal fillers. We went to the guy, who manufactured our hyaluronic acid for cataract surgery in Europe, a product called Allervisc®, we made him an offer he couldn’t refuse and he sold his company, Corneal. When we acquired the product it was called Surgiderm® – we changed the brand name to Juvéderm®. The licensee for North America was a company called Inamed in Santa Barbara, one of the two largest breast implant manufacturers in the world. Inamed had along the way acquired the Collagen Corporation. As I contemplated acquiring Inamed, I was saying to myself, ’Oh my god, I’m dreaming of silicone.’ We had been the biggest silicone IOL [intraocular lens] company in the world, and this was silicone in a different context. The lawyer in me thought it was a very stupid idea—for the first half an hour—until I started reading every Stock Exchange Commission filing that I could get my hands on. I realized that when you go through a surgical procedure in the United States, you sign an informed consent form, which is delightfully better than the standard practice for administering pharmaceutical products in terms of product liability. With informed consent, you renounce many rights, unlike taking a pill, where you don’t fill out a form. Inamed was under an acquisition offer by Medicis, which was known as the dermatology company in Arizona. We ended up breaking up that deal. I started working on that for our April board meeting, and we were ready in 2005. It was like we were hidden in the jungle, with all of our camouflage gear, and we waited long enough until we were damn certain the FDA was going to reauthorize silicone breast implants. If that hadn’t gone through, I would have had egg on my face. The moment the CEO of Inamed found out about the acquisition was akin to a wonderful, brilliant commando attack. I was at the Waldorf Astoria Hotel in New York. It was five minutes before eight in New York, and five until five in California. Just before the switchboard shut down I made the call. I’m not sure where the guy was, I think I got plugged through to him at the golf course. I had only met him once. He was from Philadelphia, very deadpan. I said, ’Nick, let me get to the point. I’m basically offering you $3.2 billion for your company.’ I think he almost dropped the phone. The offer was targeted to be almost 17 percent higher than the other offer. I believe that if you strike, you’ve got to strike well. If the CEO of Medicis had tried to compete with us, he would have turned his stock into junk. They were too small to raise the debt and 17 percent was very attractive to Inamed’s shareholders and the hedge funds. I then said to the Inamed CEO, ’I don’t want to tell you what to do, but I have been thinking about this phone call for months. This is the checklist. I’m just trying to be helpful. Obviously, your board will be your advisers. By the way, if there is any doubt and your people are wondering if this is a stalling tactic, you will be getting a call from the Wall Street Journal in the next fifteen minutes. I had already conducted my interview. We are going to be on the front page. I don’t know if it will be the front-front page or the business section front page, but we’ll be on a front page tomorrow.’ He said, ’Oh, thanks for telling me!’ The next morning, the Medicis/Inamed stock tickers separated in less than ten minutes and went the way it should, in alignment with our stock. That’s the way things work: a three-billion-dollar transaction, just like that. Then we did a road show starting in New York and Boston, and then all over the country. That led to the next idea. I had been thinking, ’What in the world am I going to call botulinum toxin, breast implants, and dermal fillers?’ Being the marketing guy that I am, I thought ‘medical aesthetics.’ Even so, I always go to the marketing people and tell them, ’If you have a better idea, my ears are huge.’ Nobody could think of a better one. Now the world press writes about medical aesthetics. AT: That’s pretty neat. DP: It’s another example of this company creating a market and overnight becoming the leader in that market. We were already the world’s leader of botulinum toxin and number two in dermal fillers. Once we launched Juvéderm in January of 2007, we became the market leader in the United States in less than one-and-a-half years, which is very unusual. To be fair to the Swedes, who are our biggest competitors, Restylane is a good product. It wasn’t like it was defective, but we came out with something better. Sweden is a sort of strange outlier, because the Swedes don’t use these products much. They are a naturalistic kind of people. I told my team to look more at the per capita use of dermal fillers in Central Europe. In order to bring the United States to this level, we poured money into direct-to-consumer advertising and were able to train doctors on how to inject Juvéderm, because we had greater reach than Medicis, a small company in Arizona. Per-capita consumption in the United States has grown from half that of France to its equivalent within three years. I had asked the marketing team how long it would take. If you like, it was my défi Français, my French challenge to the Americans, right? They did a great job and we had this big burst of growth. All the way through the Inamed and Corneal acquisition period people were just marveling at what we did. The other thing was that we had basically taken a small French company that only sold in certain markets and took it worldwide. Then the recession came. Even so, that year, Botox Cosmetic worldwide declined less than 10 percent, which tells you that people’s desire to look good is very, very high. Once women are used to the idea of looking good they are not going to go back to being old and wrinkly again. I coined the phrase, ’Your face is the one outfit you get to wear every day.’ I think during that period people were postponing purchases of clothes, restaurants, and God knows what, to get Botox. They may have waited a little bit but they did not stop. The final phase was a large investment in R&D. My friend, Scott Whitcup, the Head of R&D, did a fantastic job with it. At the end of 2011, I could tell my colleagues in the industry that in two years we had had a total of seven FDA approvals. People were saying, ’Are you serious?’ Typically, industry people knew about some of the pharma approvals, but not about the device approvals, or vice versa. I said to people internally, ’Let’s make sure we don’t fluff our execution of the approvals, particularly on the pharma side.’ The rule of thumb is four or five years of some pretty attractive-looking growth. Of course, now—literally in March of this year, or a month ago—after a deliberate hiatus of three-and-a-half years, we had another R&D day in New York City. I warned Scott Whitcup, who is a really superb guy, ’Think about it. We should have another R&D day sometime between March and June, before the summer holidays, to answer two questions. One is, ‘What have you done for us recently?’’ By this stage the pleasure of all of those approvals were beginning to be forgotten. Secondly, we have to answer the question, ‘What does Dr. Whitcup spend a billion dollars of R&D money on?’ Most logical people would say, ‘If you’ve completed all of these Phase IIIs, surely the R&D budget would at least be running flat, or even down.’ But to the contrary, we are continuing to push up R&D to double digits per year. I think this next phase will bring through our biggest ideas, the ones I’m most excited about because they are the largest. One is an in-licensed anti-VEGF [Vascular Endothelial Growth Factor A] called DARPin®, for age-related macular degeneration (AMD). We licensed it from a company called Molecular Partners based in Zurich. It has the promise of being a much better alternative to Lucentis®. Even before you put it in our drug-delivery device, it is administered four times a year, whereas Lucentis is needed eleven times a year. Even the latest entrant in the AMD space, from Regeneron, is taken monthly for three months, and then every other month. You don’t need to do arithmetic to work out that the product profile works. That thing is huge. The other one is a cousin to Botox. The initial indication for the compound is post-herpetic neuralgia. It doesn’t work on muscles but on sensory nerves. It’s in the heritage of what we’ve been doing for the past twenty-three years with botulinum toxin. There is another one. Latisse® is a fantastic product in medical aesthetics. We realized that our glaucoma drug Lumigan® had as a side effect—it’s in the package insert—growing long eyelashes. We thought, ’That’s interesting. Maybe we can turn that into a product.’ The indication is hypotrichosis or insufficient length, darkness and thickness of eyelashes. We’ll know soon whether Latisse works, not only on the eyelashes, but —and I’m hopeful—on the top of my head! I said to the guy running that program, ’Frederick, get going. I can’t wait forever!’ So, those are the top three. I think Wall Street was pretty impressed with the new glaucoma compounds and some things we still haven’t disclosed. We’re no longer the same little Allergan that I joined, even if you count out AMO, which was $600 million in sales. If you chop off AMO, the chassis was $600 million. Today we’re generating $1 billion worth of free cash flow. What we want to do with that is in-license compounds or maybe even to buy biotechs, like some of our big-pharma friends are doing. We won’t do something that’s multi-factorial—by definition, it has to fit within the pillars. Of course, the phases of the company were never quite as distinct as I have described them, but there are moments of revelation when you realize you need to do something quite different to secure another wave of growth. During that phase from 2000 to 2010, we were the fastest-growing ophthalmic pharmaceutical company. Down in the engine room, things were ticking along in a very pleasant way, and now we’re replicating what we did in ophthalmology over decades in our new businesses. AT: Thank you, David, it’s all fascinating. The chapters in part one are complete, so on to part two, yes? DP: Yes, thank you.
FOR IMMEDIATE RELEASE Announcing the arrival of 4 orphaned Navajo foals to Equine Voices, Arizona Green Valley, AZ, November 12, 2013 – Wild for Life Foundation (WFLF) is thrilled to announce the arrival of Catori, Dakotah, Shikoba and Nitika to Equine Voices . These four orphan Navajo foals were recently rescued by Wild for Life Foundation (WFLF) . "Equine Voices is