Hear How Valeant Innovates, Invests & Acquires
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Valeant CEO J. Michael Pearson tells OIS attendees how the controversial company finds new technologies.
J. Michael Pearson
Mr. Pearson has been the CEO and serving on the Board since September 2010 and the Chairman of the Board since March 2011. From February 2008 to September 2010, he was the chairman of the board and CEO of Valeant Pharmaceuticals International before the merger.
Tom Salemi: Hi, everyone, welcome back to the OIS Podcast. This is Tom Salemi, your host. We’re going to mix things up a little bit today. Instead of interviewing one person, we’re going to sort of delve into an issue in ophthalmology. And the issue today is innovation by large ophthalmology companies. J. Michael Pearson of Valeant presented a keynote address at OIS@ASCRS and it was certainly very much talked about. One of the points that Michael Pearson made was that larger companies aren’t as able to innovate new ideas in ophthalmology as smaller companies are. And several times throughout his address, he hit upon the fact that Valeant would be counting on the people at the room at the time, the entrepreneurs, the startups, the KOLs, the investors to help drive innovation and ophthalmology forward. We’re going to delve a little bit into Michael Pearson’s address, and then hit upon some counterpoints presented by other CEOs in ophthalmology. Michael Pearson opened up by acknowledging some of the criticisms that Valeant has received specifically about its interest in research and development. Let’s hear what he has to say here.
Michael Pearson: A lot of our competitors are critical of our model and where we seem to spend a little bit less total money on R&D. And how do we do it? Well, we do it by working with people like yourself. Startups, academics, practicing physicians. You’re the source of most of our ideas. You’re the source of helping us with the clinical trials. And you’re the source of what I hope in the future will be many, many new products.
TS: To back up his point, Michael Pearson pointed out that Valeant over the past year has launched 20 new products, including 5 new drugs, he says mostly in dermatology. But he hopes to increase the number of new products every year. And in the speech he revealed how Valeant’s approach to business development differs perhaps from its competitors.
MP: Well, it starts with our people and our culture. At Bausch and Lomb, the search for innovation is every employee’s job. We don’t have business development people in Bausch and Lomb or at Valeant. We do have scientists and doctors. Every person in the company is supposed to be in charge of business development in addition to the other hat they’re wearing. So every employee every day is looking for products, technologies, innovative ideas that they pass on internally, and then we spend a lot of time assessing these and then figuring out which are the ones we want to go after.
TS: Together, Valeant and Bausch and Lomb have 18,000 employees. And Mr. Pearson says that all of them are again looking for new opportunities. And he knows exactly, or he told those attendees exactly where innovation is happening in ophthalmology.
MP: And where innovation happens is not in large companies. It happens in the universities, it happens in the startups, it happens practicing physicians. And that’s really our model. We want to capture innovation. We have – a lot of not invented here syndrome, where their own pet projects are better, no matter what, than what’s happening on the outside. I hope we have the opposite, which is the best idea wins, and we’re just looking for what’s going to be best for patients and what’s going to be the best for doctors in terms of building their practices.
TS: Michael Pearson had a slide that said the three pathways to innovation. And on that slide he had internal development, licensed technology, and acquired companies. Valeant is pursuing all three, he says, and in pursuing outside technologies, either for licensing or acquisition, Valeant is making capital investments. It’s investing in smaller companies, companies with young, innovative technologies that need money to be tested and proven. So Valeant is stepping into the venture game, hoping to reap a reward further down the line.
MP: Many more of our new products are coming from the outside. The licensing of technology from physicians, universities and startups. We have a long, long list of companies and individuals that we’re funding. And they don’t get accounted for in our R&D budgets directly, but they are capital investments that we’re making, equity investments sometimes in companies and our partners. Out of some of these arrangements come things like Lotemax Gel, Vesneo, Soothe XP, the Luminesse, the eye whitener, Evista, IOLs and the Spectra surgical navigation system. It’s just a partial list of some of the products that we’ll be brining to market, thanks to people in this room.
TS: Investments of course are important. But Valeant is best known for another type of transaction, and that is the acquisition. It acquired Bausch and Lomb, tried to bring Allergan into the fold before the company went to Actavis. And Michael Pearson says that going forward, Valeant will continue to pursue this strategy. It has to to compete and to survive.
MP: We do believe that acquisition and inorganic growth needs to be coupled with organic growth, but quite frankly, we don’t have the patience, and quite frankly we cannot be competitive in this space unless we both continue to innovate ourselves, license in products, but in the case of some of these technologies, acquire them. Some of the acquisitions we’ve made include Victus, Teneo, Prolensa, Crystalens, True Line, just to name a few.
TS: The audience at OIS might not have given Michael Pearson a high grade for the delivery of his speech. It wasn’t as polished in its delivery as some other talks given at OIS. But his message was clear. Valeant will look to license and acquire and invest in new technologies. Michael Pearson was clear that innovation happens outside of Valeant’s four walls, although he did stress several times that internal development is an important part of its overall strategy, but Valeant clearly is looking outward, and it’s making investments in startups and early stage research, which is great news for the ophthalmology sector.
MP: In closing, I hope you take away three messages at lest. One is that Valeant and Bausch and Lomb are committed to bringing innovation to the market and to work with you and the best minds in the industry to make this happen. We have a track record that demonstrates we are committed, and we are eager to continue to be measured by the number of products and the importance of those products we bring to the market. Second, our approach to innovation extends well beyond the four walls of our company. The best ideas and technologies will continue to come from the outside, and we are eager to invest in you and your ideas, and partner with you so we can bring more products to the market, again, help the patients and help physician practices. And finally, that you have my personal commitment that we will invest. We’ll invest in innovation, and we’ll continue to rebuild Bausch and Lomb and restore it to its rightful place as an industry leader.
TS: Thanks for listening to this OIS Podcast. Innovation is our middle name, literally, so we’re always looking for new voices to add to the discussion. So next week, we’ll hear from the heads of AMO and Alcon and Zeiss. They’ll join Michael Pearson of Valeant in sharing their companies’ broader views of innovation and acquisition. So please tune in next week to hear that conversation. And of course, plan on joining us in Las Vegas. Go to ois.net for information about our upcoming OIS event. And if you’re a company and want to present before these folks, these leaders in ophthalmology, make sure you fill out a presenting company application. And we hope to see you in Las Vegas.