Strong Financial Growth

In January, Saunders presented at JP Morgan's 30th Annual Healthcare Conference in an effort to reintroduce the company to an audience that hadn't heard from B+L directly since it went private. Weinstein, who covered the company before it went private, said the street view of B+L was that it was "struggling on multiple fronts, including consumer [products]." But after the presentation, where Saunders revealed that B+L's revenues exceeded $2.7 billion in 2011—an all-time company record—and that its pharmaceutical division had crossed the $1 billion mark for the first time, Weinstein said there was "new interest and some excitement over B+L ... people were surprised at the company's turnaround, particularly in pharmaceuticals and the overall financial performance." B+L's current revenue breakdown by business unit is 40 percent pharmaceuticals, 42 percent vision care, and 18 percent surgical.

Saunders emphasizes the fact that B+L's financial performance in 2011 was thanks in large part to organic growth, not new acquisitions. He credits sales and marketing execution and geographic expansion as the two key drivers of growth. "For the last 20-plus years, we've been growing at roughly 2 percent per year, and we quadrupled our historic top-line growth rate; $2.7 billion represents an 8 percent top-line growth, in constant currency. We did one acquisition at the end of December [2011], and about $1 million of the $2.7 billion came from that acquisition." The pharmaceuticals division is the company's "hidden gem," and its "the strongest, healthiest, and fastest-growing business we have," says Saunders. Alcon—acquired by Novartis last April—is the leader in eye surgery products, according to Weinstein, and B+L doesn't "dominate any space the way Alcon dominates [eye] surgery today." Saunders' counter to Alcon is to leverage B+L's brand strength—the Alcon brand is well-known by physicians, but less so by consumers—across all three business units, which means bringing new business into established B+L markets. "Having all three [units] is a strength ... with surgical and pharmaceuticals, it's hard to separate out the customer," says JP Morgan's Weinstein. "B+L was missing a lot of opportunities because the businesses weren't working together, to treat patients in aggregate."

The reorganization of B+L under Saunders included the creation of three leadership teams: executive, operations, and global. The global leadership team consists of roughly 200 individuals, which includes country managers. Saunders eliminated the company's eight regional offices, and says the "country manager position is particularly important" in the company's global strategy and infrastructure. "I can tell you from my recent visits to Korea, to China, and even to the U.K., the ability to have a strong leader in-country, that recruits and retains and develops strong managers and frontline people and frontline sales reps in those countries ... that is key to success."

Around 20 percent of total revenue comes from emerging markets, and B+L was one of the first multinationals to enter China in the late 1970s, according to Saunders. The company enjoys one of its highest market share percentages there. The business in China is going through a transformation like the rest of B+L, but the market has grown significantly in the last two years. The company sells across tier one, tier two and tier three cities in China, and it acquired CT Freda, the largest Chinese ophthalmic company, in 2005.

India was different, though, because B+L had never had a pharmaceuticals business there. "We had a pretty good vision care presence, and we've been there a long time, and have a good surgical business," said Saunders. In July, the company launched its pharmaceuticals business through a partnership with Micro Labs. The partnership brought access to "a world-class manufacturing facility in India," and a platform for the launch of six pharmaceutical products to "existing surgical customers," says Saunders. In India, B+L has "very high brand recognition," and the company hopes to launch an additional six or seven glaucoma-related products to create a portfolio of 13 or 14 products on the market by this year's end. Saunders said the company hired and trained around 160 sales reps to support the product launches in India. Asked about an overcrowded environment for sales, and a general reticence about using Western eye medications among the Indian population, he said the "nice thing about ophthalmology is it's a very specialized, very focused profession ... we don't have a problem in India."

In Argentina, B+L announced the acquisition of Waicon in December—the lone aforementioned acquisition in 2011—and the purchase is in keeping with the kind of deals B+L is scouting. With Waicon, described by Saunders as "the No. 1 vision care company in Argentina," B+L gets "the expertise, the distribution channel, and the products," which will be leveraged across Latin America over time. "The combination of having both B+L and Waicon brands will put a dual-brand strategy in Latin America," says Saunders, which gives the company a "turbo boost" in a geography where "we were a little undersized."

Saunders says he will continue to put a heavy focus on in-licensing deals, as well as smaller, "bolt-on" acquisitions such as Waicon or Tubilux, an Italian ophthalmic drops manufacturer (acquired in 2009), that meet a specific need. In Japan, the company recently got approval on its Stellaris PC device (approved in the U.S. and the E.U., in 2010), and formed a partnership with Topcon Medical Japan to co-promote Stellaris and other products.

At the JP Morgan Healthcare Conference, where deal-making was the real magnet for attendees this year, Saunders says he found "some promising opportunities with smaller companies, including a couple of high-potential deals that are nearing completion."