FRIDAY INTERVIEW:David Pyott, Allergan chief executive
COMPANIES CAN be remarkably coy about their products. Ask Allergan what it does and, aside from ophthalmology, you will hear about “franchises” in medical aesthetics and obesity intervention among others. Talk to the man or woman in the street and that will translate into Botox, breast implants and gastric bands.
Beauty, by and large, is Allergan’s business and, judging by the company’s recent performance, it’s a business that is showing itself to be remarkably recession-proof.
The company’s earnings per share have risen consistently over the past decade, averaging 19 per cent per annum and growing 8 per cent even in 2009 at the height of the recession.
David Pyott has overseen that growth. In US corporate terms he is a veteran, having been installed as chief executive of Allergan back in 1998. He came straight into the company in that role having served previously as head of the nutrition division at Novartis.
In 2001, he was also appointed to the post of chairman. He is somewhat unusual in US corporate terms in that he has extensive international experience, having worked in places as far-flung as Malaysia and Singapore on the one hand and Austria, Spain and the UK on the other.
An amiable and quick-witted Scot, with a 30-year record in the pharma sector, Pyott and his company have consistently been ranked among the leaders in their sector over his tenure. This was recognised in his homeland when he was made a CBE in the British honours list in 2006.
And, despite entering his third decade at the helm of the company, he has no intention of standing down. On the contrary, Pyott continues to enthuse about the prospects for his team, his company and its products.
Sitting in a Dublin hotel a day after hosting a board meeting at the company’s Westport operations – the company’s second-largest manufacturing base and the biggest outside the US – he runs through a series of areas in which the company is, or has recently, been developing new products.
“We are bringing more products through our pipeline to market now than at any time in the past,” he says, as evidence that his long tenure has not induced any sense of inertia.
Pipeline is everything for a pharmaceuticals and healthcare business and Botox is at the heart of much of the current RD focus at Allergan – at least outside the ophthalmology business on which the company was founded back in 1950, and which still accounts for 50 per cent of revenues. The injectable form of the botulism toxin, Botox, has become a mainstream treatment for people looking to smooth facial wrinkles.
But the company has been looking at other possible uses and in July, Britain became the first country to approve the drug as a preventative treatment for chronic migraine – a condition the company says affects as many as 700,000 people in the UK alone.
The group is confident of getting approval to market the drug in this new area in other countries – including the US – shortly.
Sometimes, as Pyott happily admits, coincidence can play its part in the direction of RD. It was patients using a medicated eye-drop for ocular hypertension developed back in 2001 who first noticed an interesting side effect – they began to grow longer, fuller and darker lashes.
Pyott, half-jokingly, asked his head of research whether he might be able to identify that process and create a separate drug that would specifically encourage growth in eyelashes other than as a side effect.
In late 2008, the company secured approval from the US Food and Drug Administration to market Latisse. Quickly, the drug has moved from being a niche product to a central element of the company’s portfolio, with peak potential revenues north of $500 million (€359 million) pencilled in. This year, it has gained access to new markets.
Ireland is a major location for the company, accounting for half of Allergan’s global drug output and for close to 10 per cent of the Californian company’s staff headcount.
Unusually, when it arrived in Ireland back in 1977, Allergan opted to site its operation in Westport – at that time away from the main pharmaceuticals hubs and export infrastructure.
Over 30 years on, Westport is still the group’s major operation in Ireland, with roughly 90 per cent of its Irish staff working out of what is now a 46,450sq m (500,000sq ft) plant on a 30-acre site.
Pyott’s one quibble on the company’s business here is about the state of Irish roads, despite the investment in national infrastructure in recent years. Most of the company’s goods are shipped to Shannon or Dublin for export by air from the Westport plant.
“It can be a bit awkward, especially for local people stuck behind our trucks on roads near the plant,” he says, having driven up to Dublin that morning from Mayo for our interview.
That aside, he sees few drawbacks in basing the Irish operation in Westport. The compact nature of Allergan’s products means they are cheap to export in relation to their value.
And being away from the major hubs has had its advantages. As a major employer in the area, Pyott says the company experiences very low turnover in staff.
“The workforce is loyal and we have had few problems in attracting the calibre of staff we need. In many ways, we find ourselves as an employer of choice in the area.”
In fact, the company moved a back office operation down to the Mayo plant from Dublin during the tiger economy years specifically to address problems with staff turnover that it was experiencing in the capital.
For all the stability in Westport, Pyott says the operation is unrecognisable from the initial plant opened in 1977. “Even over the past three years, the degree to which elements of the plant have become automated makes it almost unrecognisable even to people like me visiting occasionally,” he says.
It hasn’t all been plain sailing for Allergan in Ireland. Back in 2008, the company closed its Arklow silicone breast implant operation with the loss of 360 jobs, as it consolidated the business in a more modern facility in Costa Rica.
Further afield, Allergan last month agreed to pay $600 million to settle an investigation by US regulators into its marketing of Botox for “off label” usage – usage for an unapproved indication – between 2000 and 2005.
In general, however, Allergan, 33 years in Ireland, has been a story of steady growth both in job numbers and importance within the overall company. Its development is evident in the three separate Botox units on the Westport site, testimony to the rapid advance of technology and automation over recent years.
For all its growth, and its high-profile products, Pyott is not worried about the company falling victim to the periodic bouts of consolidation in which the pharmaceutical and healthcare sectors indulge.
He happily counts off the number of top pharma businesses that are rumoured to have approached Allergan over the years, most recently Sanofi-Aventis. The latter’s recent decision to launch a hostile offer for Genzyme would appear to have categorically knocked that notion on the head.
Allergan’s view, he says, is that “we’re not for sale”. He concedes you can never be absolute in business and anyone coming in with a big enough offer would have to be seriously considered.
However, given that the company is perfectly comfortable on its own – needing neither restructuring nor access to wider markets – “somebody would have to come out with a very compelling proposition”, Pyott says. He questions whether the figures would make sense to any prospective suitor in terms of synergies.
“That’s why I’m still sitting here,” he says. Pyott joked recently that the bout of mega-mergers in the sector delivered an “influx of refugees”, most recently from Wyeth, to energise Allergan’s pool of expertise.
In fact, while not the most acquisitive company in its sector, Pyott sees that as Allergan’s more likely position. “We are constantly looking at new opportunities and we have the money to do the right deal,” he says.
ON THE RECORD
Age:56
What might surprise:Pyott qualified with a law degree and then worked in banking before moving into the pharmaceuticals business
Interests:Outside work, Pyott is keen on spending time in the mountains close to his Californian home, either walking or cycling.
