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Pharm Exec speaks to Bausch + Lomb CEO Brent Saunders about how he turned around "a very troubled company".
When Bausch + Lomb opened its new China headquarters in Shanghai a few months back, CEO Brent Saunders was emcee—he oversaw the ribbon cutting and the formal ceremony declaring the office open, which included a visit from the good luck Dragon and other fortuitous fanfare. The new facility, Saunders says, represents B+L's revised business model, which prizes collaboration across business units and personnel to move the company closer to the needs of its customers. "Immediately before you hit the reception desk at the [Shanghai] office, there's a state-of-the-art surgical room and a state-of-the-art vision care room for physicians," says Saunders. "We can actually bring customers into that surgical experience room in China and show them how to use our equipment, do surgery, and provide them with training and education." There is even a supply of pig eyes on hand for demonstrations.
(JOHN HALPERN PHOTOGRAPHY)
Brent Saunders became CEO of Bausch + Lomb, one of the oldest American healthcare companies, in March 2010. B+L developed the first soft contact lens; won an Oscar in 1954 for its CinemaScope lens; and, in 1986, after Tom Cruise donned a pair of Ray-Ban Aviators in "Top Gun," sales for the 50-year old product line jumped by 40 percent. Things have changed since then (B+L sold off Ray-Ban to an Italian company, Luxottica Group, in 1999), and when Saunders joined, he found himself at the helm of "a very troubled company." After the global recall of its ReNu With MostureLoc lens cleaner in 2006, followed by questions about dubious accounting practices overseas, the company went private in 2007; Warburg Pincus, a private equity firm, paid roughly $65 a share for B+L, or $3.78 billion, and assumed an additional $800 million in debt. Perhaps more disconcerting than the recall—the B+L brand is "resilient" due to strong ties with physicians, says Mike Weinstein, managing director, U.S. equities, at JP Morgan—was the "holding company mentality" that had fogged B+L's direction. The three business units—vision care (contact lens and solutions), pharmaceuticals (ophthalmic drops), and surgical (medical devices)—were run in near isolation from each other, and they weren't focused on the customer. "We were really good at publishing patents and research papers, but we weren't driving innovations that made a difference in people's lives," says Saunders, who is 42. "We wanted to refocus that."
B+L's singular therapeutic focus—eye health—was splintered by the lack of collaboration between its business units, so Saunders began his tenure as CEO in listening mode. He spent time with customers and frontline sales reps and managers, in addition to scientists in R&D and line managers in manufacturing, and came away with a unification strategy, which he calls "connecting rods." One of the initial changes Saunders made was to bring marketing, sales, manufacturing, and regulatory input to bear on the R&D process; as a symbolic commitment, he changed R&D to 'D&R,' placing the emphasis on 'development.' "We didn't cut one research head in doing this," says Saunders, "but we are going to put our effort and our money and our resources behind development." Communication between the pharmaceutical D&R group and the contact lens D&R group, for example, can help anticipate and then adapt to changes in the market, like a shift toward more implantable, drug-eluting systems in the eye; or a surgical solution for glaucoma, a condition that today is predominantly managed through drug interventions. Additionally, ophthalmologists and optometrists are increasingly working in concert to offer a full range of buyout services to patients, in one setting. According to Saunders, "99.8 percent of our business is focused on eye health ... the entire spectrum of eye health. That gives us a unique perspective on patient needs and what ophthalmologists and optometrists are looking for," he says. The company employs close to 3,500 sales reps globally, and "calls on virtually every ophthalmologist and optometrist in the world," says Saunders.
To help initiate information exchanges across frontline managers and sales forces, Saunders says the company uses Chatter, a SalesForce.com CRM platform, which provides an open, global forum for communication. Reps can do account planning on Chatter, and exchange tips on communicating with physicians. Saunders also launched an off-line pilot program last year in the U.S., informally known as "Have a lunch on management," which provides a free lunch to sales reps who sit down with a colleague in the same territory to talk business. The program is getting rolled out in other countries, says Saunders. He credits board chairman Fred Hassan's mentorship and "open-door policy," as an instructive guide in his own vision.
In addition to Chatter, and perhaps to make a more visible commitment to those employees working further down the ranks—but closer to the customer—Saunders put the executive suites up for sale. "We had a big skyscraper tower [in Rochester, N.Y.] and then we had about a million square feet where we had a lab and a plant, and that's where everybody really worked. The executives sat in the big building, and all the other people—the really important people—worked at the building a couple of minutes away," says Saunders. "So we moved out ... We put our executives in the other building, and put the tower up for sale. And I got notes and letters from people saying, "That's our heritage." But the building has been around for 10 or 11 years, while the company has been in business for almost 160 years, so I don't think that represents our heritage," Saunders says.
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 , 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."
In addition to forming the new management teams mentioned above, Saunders hired Susan Roberts, corporate vice president and chief compliance officer, and gave her the task of tailoring the B+L global sales and marketing code for each country where the business operates. Saunders also established a medical team headed by chief medical officer Cal Roberts, who joined the company last March, and sits on the executive leadership team, reporting to Saunders. Roberts is an ophthalmologist and surgeon, and represents the customer's voice in the decision-making process; manufacturing plants and new offices may have demonstration rooms that encourage participation and input from customers, but Roberts is the voice on the inside.
In addition to weighing in on new deals, Roberts is in charge of the company's medical team, which recognizes anyone at the company with a professional degree. Speaking by phone to Pharm Exec from the Hawaiian Eye conference on The Big Island, Roberts notes B+L has "119 MDs and ODs working for the company full-time." After surveying personnel with professional degrees—Roberts has created an interactive, electronic newsletter for medical team members—new ways for them to contribute became apparent. "We have a doctor from Croatia, who is working in our surgical division in California. B+L is expanding in Eastern Europe, and there is nothing that our doctor in California would enjoy more than to help us in Croatia—to go in there and help introduce our products, meet with doctors and be of source of knowledge and a source of connection between the company and Croatian doctors," says Roberts.
At the Hawiian Eye conference, Roberts said the femtosecond laser, a device representing "the most disruptive change in cataract surgery in 40 years," was the talk of the conference. B+L's femtosecond laser device, called Victus, was approved in the E.U. in December; Saunders says he thinks the device will be approved this year in the U.S. Alcon beat B+L to market with its LenSx femtosecond laser, but Saunders says B+L's device is capable of more than just cataract replacement surgery. "Today on the LenSx machine, doctors have to do the procedure in one room, and then wheel the patient into the OR to do the lens replacement," says Saunders. "That's true on ours as well, but we're looking for ways to solve that problem, by hanging more onto the Victus platform."
Other potential "game-changers" in the pipeline include Mapracorat in the pharmaceuticals business unit, a novel anti-inflammatory drug in development for several indications. In the vision care unit, new contact lens materials could provide a new avenue of growth. Saunders says B+L isn't going to be the biggest player in the eye care space, "but we don't want to be the biggest, because I think one of our secret weapons is our agility and nimbleness, and the speed at which we can get things done."
Saunders aspires to return B+L to the public market, but says his goal right now is to "build as strong a company as we can ... 2011 was an inflection year for us, in terms of financial performance and building a pipeline, and creating a dynamic workplace, and in some ways we have a lot more work to do. But I think we're well on our way to transforming our company."