The combination of Pfizer and Allergan certainly creates some waves in ophthalmology. But did these choppy waters have anything to do with recent leadership changes in the sector?
Tom Salemi: Hi, everyone, welcome back to the OIS Podcast. This is Tom Salemi, your host. Thanks a lot for joining us today. A few weeks ago you may remember we visited with David Muller, the CEO or former CEO of Avedro, who has left the company at the end of 2015 to start his new venture, Allotex. You can look back a couple of weeks and get the full story from David on that one. David’s news was big, no doubt, because we’re accustomed to seeing him on the OIS stage telling Avedro’s story. But in the grand scheme of things, with some of the other leadership changes we’ve seen announced in 2016, it certainly was on the smaller side. Tom Frinzi, of course, made big news during the week of JP Morgan when Abbott Medical Optics announced he would take over and lead that division. The news surprised many, not because Frinzi isn’t qualified, but because he’s seen a sort of a small company guy, the type of leader who wants to climb under the hood of a WaveTec and rip it out, and replace the engine. And AMO simply isn’t that type of company. Back at OIS@AAO, we honored Tom Frinzi and Dan Durrie for their work with WaveTec. You can watch the presentation. The video is attached actually to the email that also sent you this broadcast. Or go to OIS.net and you can find it there. And Frinzi at that presentation, where he was being interviewed by Dick Lindstrom, was asked specifically what was next.
Dick Lindstrom: What’s next? What is next, Tom? What’s next?
Tom Frinzi: I’ve been doing nothing for six months, and I think she’s ready to get me out of the house. So I’m starting to get the itch, so anybody that’s got a great idea out there, I’m all ears.
TS: Well, apparently AMO had something interesting to say. A few weeks later, Alcon announced that they’d be making some changes of their own. Mike Ball would be replacing Jeff George as the head of a new, slimmer Alcon, one that focuses more tightly on surgical tools. Jeff George has been a regular on the OIS stage. He was our keynote speaker at OIS@AAO in Chicago. So it was a surprise to see him go after such a short tenure, at least to me. So surprising, though, that we kind of have to ask the question, Is there a larger force at work here? Is the ophthalmology sector getting more competitive where changes in leadership like these are necessary? I made the rounds and I talked to some of our OIS favorites about what these replacements mean for ophthalmology. First I spoke with Caroline Corner. Carolyn, of course, is the managing director and senior research analyst at Cantor Fitzgerald. She is one of the ophthalmology analysts we had on stage at OIS@AAO in Las Vegas. Carolyn doesn’t cover AMO or Alcon, but she knows the space, and she says it’s getting more competitive, and changes like these could be expected.
Caroline Corner: I think we’ve been talking for years about how ophthalmology is so innovative, there’s so many new things coming, whether it’s drugs, devices, combinations thereof. And I think the area’s becoming more and more competitive, and I think changes in management, we should, I think expect those kind of big, sweeping changes as well as the companies kind of position themselves. If you look at Alcon, for example, and I don’t cover this one, you know, last year they were at the end of the year [extremely limiting?] little business units. They had some – they sold some 20 million ophthalmology manufacturing thing. There were hints that they’re kind of thinking things through. But frankly, with Pfizer acquiring Allergan, they should be thinking things through. They should be very thoughtful right now, and I think we’re seeing that coming to fruition. They’ve got to maintain their competitiveness because there’s a lot of exciting things out there. And if you miss the boat, then you’re out of the game very quickly.
TS: We talked next to Larry Haimovitch. Larry’s been covering ophthalmology in medical devices for many decades. And he sees that the changes at the two companies are really more independent than connected, except that they share a common trait. The two companies were both struggling, and struggling enough to require a change. Larry sees two principle challenges. First, and this is an old axiom, but it’s true, big companies have a difficult time with innovation.
Larry Haimovitch: The big companies, the big, big companies don’t innovate, whatever field it is. The innovation, if we look at medical devices or even other things, where does innovation come from? Comes from the small company. Not the big companies. The big companies usually are followers, now leaders. Or the big companies are acquirers.
TS: The second challenge is more of a clash of cultures. Historically, Larry reminds us, the pharma companies simply just don’t do a good job of managing the medical device businesses that they acquire. The cultures just aren’t all that compatible.
LH: … in the device business, you have to move quickly. The life cycles of products are much shorter. Pharmaceutical industry, you know, you have 17 year patents. It’s a totally different mindset and a totally different business. Medical device is just not the same as pharmaceuticals.
TS: We’re going to take a quick break from this conversation to remind you to go to OIS.net if you are the CEO of a presenting company and you want to tell your story at an upcoming OIS. The application button is there. Click it and fill it out, send it in. And we hope to see you on stage at OIS@ASCRS or a future OIS. Now back to this conversation.
TS: The pushing and the pulling between the device and pharma, elements of any business will continue. But it will take strong management to sort of help guide the entire entity forward. Bill Link, General Partner of Versant Ventures, and of course a co-chair of OIS, feels the new hirings really put the companies and ophthalmology sector in a great position to succeed.
Bill Link: And I’m pleased and excited, candidly, that we’ve got some seasoned leadership coming into AMO. As you know, Tom Frinzi is a proven, committed leader to the ophthalmic space for decades, and I’m excited for Abbott and AMO and the customers and the industry overall. And I think with Mike Ball coming back into ophthalmology after having been at Allergan for years at a very high level, very solid guy, understands the business, and I think Alcon has had good leadership through the decades, and this is a good step for the leader in our space. So it’s a good step for Alcon as well.
TS: So what does this mean for the ophthalmology sector overall for the other players out there, not just the big guys? I decided to talk to Mark Forchette. Of course, Mark’s an accomplished CEO in ophthalmology. He’s a former president and CEO of OptiMedica. And Mark does see some changes afoot, both just in the stability of the sector, the familiar faces, the familiar entities, the addition of Pfizer, the changes at Alcon, even at AMO. It all creates opportunities for other companies in the ophthalmology space. Let’s have a listen.
Mark Forchette: I think it is a very interesting time. And I look at the various changes, and they kind of come from different directions, kind of converging on different objectives with them. But that being said, I think you look at this space historically, and for a long time it was very constant and seemed very stable in terms of the companies and their positions in the marketplace, and kind of what they delivered and even the people. There was a lot of stability in who the individuals were that were in those companies. So now clearly it is undergoing some change and some transformation. And in a lot of ways, I look at that and say when there’s that magnitude of it – you know, it’s kind of across the board; every one of these companies seems to be going through a lot – then it creates a new playing field, and you have to sort of reset where the position is for each company. So I imagine that that’s going on absolutely. And if you’re a tertiary player or secondary player, that’s a huge opportunity to jump to the front. If you’re a front runner, you gotta be careful that you keep your frontrunner status, and so you gotta do things right. And so this is a really pivotal time, I think, and I think an intriguing time.
TS: So there you have it. Going forward, we’ll see what happens. Tom Frinzi and Mike Ball, welcome to the OIS community. It’ll be great to see those two leaders, both the individuals and the companies, take their place up on stage at OIS@ASCRS, or a future OIS if not there. It’ll be interesting to see how this plays out long term. If you’re a mid-tier company, if you’re a Glaukos, for example, this certainly might present an opportunity for you to move up to take advantage of any uncertainty in the marketplace to establish yourself as also one of the leaders in ophthalmology, certainly not at the tier of the larger companies that we’re talking about, but there are some open rungs on the ladder looking upwards. So these are interesting times, which is all we can ask for. I’m very grateful for you for joining us on the OIS Podcast. And of course, thank you to Bill Link and Caroline Corner, Larry Haimovitch and Mark Forchette for sharing their thoughts on the sector. There’s a lot to watch going forward. So it’s great to have this little guide. And thank you again for listening. Don’t forget, go to OIS.net if you have not registered for OIS@ASCRS. It’ll be May 5. Go to the OIS website. It looks brand, spanking new because it is. It’s been redesigned with new content and new layouts and new design. So please enjoy that. Find the register button, sign up to go to OIS@ASCRS on May 5, and we’ll see you in New Orleans