With the planned combination of Pfizer and Allergan to create the world’s largest pharmaceutical company, Brent Saunders, a key player in two significant acquisitions of eye care firms over the past three years, will assume a leading role in the combined company.
Saunders, president and CEO of Allergan, will serve as president and COO of the combined company, the number-two slot behind Pfizer chairman and CEO Ian Reed, who will retain his title in the new firm, the companies announced at an analysts’ call on Monday morning.
Eye care will play a significant role in new drug development within the combined company. At the analysts’ conference, Reed and the management team said the combined firm will have 70 mid- to late-stage development programs in key therapeutic areas. Aesthetics and dermatology leads all areas with 21 such programs, but eye care ranks second with 17.
“The combination of Pfizer and Allergan will create a new biopharmaceutical leader with leading therapeutic categories, including eye care,” Saunders said, responding to a question from Eye on Innovation. At Allergan, we are a market-leader in eye care, with an enviable portfolio of differentiated products and pipeline programs, including in dry eye disease, glaucoma and AMD, and are committed to advancing innovation for eye care professionals and the patients they treat. By combining with Pfizer, we will have an even greater impact on the eye care community, by expanding our product offering into more markets globally and having enhanced resources to discover and develop new treatments for eye care professionals.”
Eye care programs would comprise four different programs in DARPin—for designed ankyrin repeat proteins—for treatment of age-related macular degeneration (AMD) and diabetic macular edema (DME); Brimo DDS for atrophic AMD; Tripligan for ocular hypertension and glaucoma; Bimatoprost SR for glaucoma; Pilo/Oxy for presbyopia; multi-dose preservative-free forms of Ganfort and Restasis; and dry eye programs for FPR2, cyclosporine SR, Androgen, Cortisol analog, OCU Tearbud 1, Omega 3 OTC, and Mimetogen.
Asked by analysts to identify Allergan’s most promising products, Saunders, in a conference call with Pfizer and Allergan executives, listed Darpin AMD, which is currently enrolling in Phase III trials along with treatments for depression, uterine fibroids, and gastrointestinal disorders. Saunders said opening up international markets to Allergan products presented its own significant opportunity. The merger would provide access to about 70 new worldwide markets for those products.
Saunders told analysts that Allergan at present has minimal reach into Japan, which he identified as the second largest pharmaceutical market in the world. Pfizer already has a “multibillion” dollar business in the country. “We’re trying to figure out how to bring our product flow into Japan in an efficient way. The issue is solved through this transaction,” he said. “Take China. We have most of our aesthetic and eye care products registered in China. We have a very strong, growing business there but we’re focusing on [the largest cities]; now we go in with tremendous depth, the talent to complement our talent. And I think we can take China to an absolutely new level with our product profile added to Pfizer’s.”
The $160 billion deal is structured as an acquisition of Pfizer by Allergan to allow Pfizer to relocate its domicile to Ireland and take advantage of the country’s lower corporate tax rates – a deal commonly referred to as an inversion. Pfizer estimated its corporate tax rate would be around 25% for 2015 versus about 15% for Allergan, according to Reuters.
Pfizer chief financial officer Frank D’Amelio said he expected a combined tax rate of 17% to 18% by 2017. The agreement also accommodates Allergan’s pending sale of its generics business to Teva Pharmaceuticals Ltd. for $40.5 billion, which Allergan expects will close in the first quarter of 2016.
Saunders, who has his MBA and law degree from Temple University in Philadelphia, had been president of global consumer health care for Schering-Plough from 2003 to 2009. In 2010, he joined Bausch & Lomb as president and CEO, and engineered the company’s sale to Valeant.
He joined Forest Laboratories as president and CEO in 2013 after leaving B&L and guided its acquisition by Actavis in 2014. That vaulted him to president and CEO of Actavis, where he oversaw the acquisition of Allergan while it was fighting a hostile takeover attempt by Valeant. Actavis adopted the name Allergan for the new combined company but maintained Ireland as its country of domicile.
Saunders, in the call, suggested Pfizer will still look to grow through a combination of internal development and acquisition. “There are plenty of opportunities for white space and growth,” he told analysts. “That will come from a balance of our own pipeline as well as business development. A company that has $25 billion in free cash flow is going to have a lot of optionality in the future.”
Pfizer executives left open the possibility that the company could be divided up into smaller businesses in three or four years if transactions added shareholder value.
Global operation headquarters of the new Pfizer will be in New York, but the new firm will domicile in Ireland under Allergan Plc’s charter. In the call, executives said the corporation combination shouldn’t disrupt or displace employees. Saunders specifically was asked about Allergan employees, who one analyst said the company went out of its way to “protect” during the acquisition by Actavis.
“The reason we ‘protected’ our colleagues in California is because they are quite good at what they do,” Saunders answered. “Eye care, for example, is headquartered there. Southern California is the epicenter of eye care innovation. Our eye care franchise will stay in California. Medical aesthetics is based out of California. Our discovery unit is in California … I suspect that will stay there for the long term. And so it’s not about protecting people, it’s about keeping the best people in the right location to drive value in the future.”
Reed said closing is expected in the second half of 2016 and it’s subject to completion of Allergan’s pending divestiture of its generics business to Teva. The agreement has a termination clause that would pay out fees up to $3.5 billion if the deal falls through.
Saunders didn’t expect Allergan or Pfizer employees to skip a beat during the transition. “I don’t think the integrations will be a distraction for our people. We are quite experienced in doing these things,” he said. “We heard a lot of skepticism through the Allergan integrations that we would be able to keep that strong growth going in those legacy businesses. We proved quarter over quarter that our people could handle the integration.”
Saunders will also be one of four members of Allergan’s board of directors who will join with 11 members from Pfizer’s current board to comprise the board for the combined company.
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