Behind the Deal: McEvoy On Where Will AMO Fit into J&J and What the Deal Means for Eye Care

Ashley McEvoy, group chairman of J&J’s Vision Group, says the combination of consumer and surgical businesses will create a powerful new force in ophthalmology.

Podcast Guest:

Transcript

Tom Salemi: Well, Ashley McEvoy, welcome to the Podcast.

Ashley McEvoy: It’s a pleasure to be here, Tom.

TS: I know you don’t have a lot of time, so I’ll cut to the chase and just hop into questions. I know it’s a busy time over there. Congratulations on this deal.

AM: Thank you. No, it’s a good day for J&J and a good day for eye health.

TS: How did the transaction come together? Is this something that has been talked about, or there have been conversations going on for a time?

AM: Well, you know, Tom, you know us as a contact lens company. We enjoy the fortunate position to be number 1 behind Acuvue. But we’ve been very close to eye health over the past few years, really assessing the industry and the science and the technology. We think eye health is one of the top five largest eye health segments. It’s growing north of 5%, and there’s significant unmet needs still to be had. So when we’ve been keeping our eye on Abbott Medical Optics, the number 2 surgical player, very strong portfolio in cataract and in Lasik procedures. We think that they have a strong, differentiated pipeline, particularly in intraocular lenses. And that coupled with a world leader in Acuvue and the backing of a Johnson & Johnson in eye health, we really are quite passionate about the value we can provide the customers and for patients.

TS: That’s great. It does seem like a natural fit. Where does the fit structurally, or corporately will be under vision care in eye health, and under you, that’s where AMO will go?

AM: That’s correct.

TS: OK. And what will the leadership look like? Has that been decided?

AM: So clearly, we like to say hopefully Tom Frinzi’s coming home again. We’re welcoming all of our AMO colleagues at close, obviously we’ve signed the deal. We’ve not closed the deal. And we really are looking forward to having the AMO colleagues join the J&J family. We’d love to have Tom Frinzi, a very credible ophthalmology expert, rejoin Johnson & Johnson after spending some of his early years at Johnson & Johnson, and really just looking forward to again combining the best of both to create more value for customers around the world.

TS: I forgot about the homecoming aspect. That’s a great point. Looking more broadly at J&J, a lot of its growth, a lot of attention has been paid to the growth on the pharma side, and devices have been looked at a bit differently. This is obviously a device play. But do you envision a situation where ophthalmology drugs become part of this story in the future?

AM: So I think, Tom, as you know, we’ve been an active cell therapy program for the treatment of geographic atrophy right now. It’s in phase 2B. The fun thing about J&J is we’re able to tap into a lot of subject matter experts throughout the entire enterprise, whether they be mechanical engineers who really understand drug delivery mechanisms, whether they be people who’ve spent their years in surgery trying to create a new procedure and get the right kind of standardization and harmonization for doctors, or whether they be people who are “biologic experts” in cell therapy. We kind of smush them all together in a room, and they’ve really created this unique drug delivery mechanism that has pretty robust efficacy and a sound safety profile, again, still in phase 2B trials. So I think that that’s a sign of pharmacological intervention, and as we just spoke about, there’s a contact lens and refractive of helping people see, and then obviously the new complement in the surgical ophthalmology space.

TS: So is there an opening for future acquisitions like this one of this size on the drug side? Or you think that might be something that would be grown more in house and organically?

AM: You know, I’d say to be determined. I think we have to assess where the unmet need is and where can we have a differentiated capability and offer value.

TS: Makes sense. And on the device side, we’ve obviously seen a lot of acquisitions on the MIGS front and the glaucoma front. This is a space where AMO hadn’t played previously. Is it an area where we might see J&J make a play?

AM: I think we’re always paying attention, Tom, to areas that are disruptive and we’re encouraged in the world of ophthalmology that a lot of pioneers, quite frankly, started many years ago to start to nurture and see where some of the really meaningful technological innovations can make really sound value for customers and for patients. So we’re keeping a close on that. We have work ahead of us right now on making sure we have a very strong closure and integration team. But I’d say stay tuned.

TS: I certainly will. Do you see any changes to commitments to R&D? Is this going to be an area that you’ll beef up in ophthalmology? You mentioned some of the programs you already have going on, but what might we see in the future?

AM: Listen, I mean it’s demonstrated that it’s a very innovation driven category. And I think we have to stay apprised to both emerging market needs as well as developed market needs, and both from an implant point of view as well as a capital equipment point of view. So I’m encouraged by the combination of our optical expertise and material science expertise. We actually have a big energy company in our surgical business, so combining that prowess with what AMO has built in capital equipment, I think we have the makings of a meaningful portfolio from which we will clearly do some rigorous life cycle management to ride out patient needs.

TS: And looking at it from the customer perspective, what changes might physicians see, if any, either from the sales people or interactions with J&J if the deal goes through?

AM: You know, when we do this well, which is what I expect us to do, I think that both of the O’s will benefit. So the optometry community, which we’ve been very close with, of supporting the profession and making sure that we open up different geographies around the world to make sure that there’s good market access for the contact lens. I think that there’s a beautiful community of connection, if you will, in ophthalmology. And AMO’s been paying close attention to the ophthalmology community. But as you know, we’re starting to see a lot more integrated patient care. An example in the United States is optometrists are doing a lot more medical, whether that be in glaucoma or allergy or anti-infective, and even some pre- and postop when it comes to cataract surgery, which is the number one surgery done around the world. So we actually envision a world where there’s more close collaboration and both professions are “skilling up,” and that perhaps J&J can be a little bit of a bridge for them.

TS: That’s a great point. Of course, we’re seeing a lot of aesthetics avenues as well, or additions in ophthalmology and I suppose some optometry as well. Is there an opportunity for J&J to build out that as well?

AM: I think we view that there’s the power of the brand, you know, these are these unique models where consumers are a lot of times the ones who have to make that first decision, like contact lens, to enter the category. So Acuvue for 30 years has been working with consumers to build awareness of the value of good quality eye health and encouraging them to have a healthy discussion with their doctors. So the notion of a consumer engaged in these healthcare decisions I think can add value when you look at some of the premium penetration in cataract surgery where people have to pay out of pocket, or perhaps even a Lasik surgery.

TS: Interesting. And final question: just looking broadly across the spectrum, you were on the Masters of the Universe panel back in New Orleans at OIS@ASCRS. Jim Mazzo did the presentation about the changes at that level, the different companies acquiring the others, how that’s sort of settling out. We’re seeing still more of that go on since then with Jim joining Zeiss, and other news including this one. Is this an ongoing process, an ongoing maturation of ophthalmology? Or do you – and I know you’ve been involved in the industry for some time – do you see this as an unusual amount of activity at this level?

AM: Yeah. I would say – I’ll speak about it from a J&J lens. I mean J&J is a broad based, diversified healthcare company, and I think with Bill Link on stage we said I’m really yearning for the days of making sure that we have a multi-disciplinary approach in the world of eye health. And I really believe in that. And so I really think that there’s a convergence on technologies, a convergence on customer value as I just mentioned. These communities kind of coming together in service of remarkable eye care for patients.

TS: Great. Well, this is an exciting deal. We look forward to hearing more about it at OIS@AAO. And thanks for taking a few minutes today.

AM: Look forward to hearing you in October. Take care, Tom.

TS: Take care.