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Allergan CEO Saunders warms up to drug discovery

November 10, 2015
Life sciences

(Reuters) – Brenton Saunders, the whiz-kid pharmaceutical executive with a reputation for being wary of the costs of early-stage drug development, says he’s open to new ideas from outside and is now warming up to investing in drug discovery if it makes sense for his company.

That could ease concern that if Allergan Inc’s (AGN.N) “friendly” talks with Pfizer Inc (PFE.N) end in a merger, the combined company may not remain one of the world’s largest inventors of new medicines.

“I practice a very open minded management structure and learn new things all the time that change my opinion,” Saunders, 45, said in a phone interview with Reuters from an Allergan discovery lab. “For instance, when Actavis and Allergan merged, we didn’t have any discovery capabilities, but we assessed Allergan’s discovery capabilities in ophthalmology and aesthetic medicine and recognize they added a lot of value. Not only have we kept them; we’ve invested in them.”

While sources close to the ongoing negotiations stress that no decision on Saunders’ role has been taken yet, the possibility of Pfizer being led or influenced by an executive who has not overseen the full development, from discovery to approval, of a single drug raises concerns among many industry insiders.

Pfizer refused to comment on Saunders’ role in any potential deal with Allergan. Pfizer board member Dennis Ausiello, chief of medicine at Massachusetts General Hospital in Boston, said in an interview that Pfizer would not be Pfizer without drug discovery.

“Innovation is at the heart and core of the business, and discovery is at the heart and core of innovation,” Ausiello said, also acknowledging that acquisitions also have an important role to play in Pfizer’s drug development strategy.

The New York-based company sees one or more additional new product launches each year through 2022 and plans to have 10 new immuno-oncology drugs in clinical testing by next year.

Saunders has said that drug discovery is too inherently risky and costly, and called the idea that big pharma players need to do it a “fallacy.” He prefers to license or acquire medicines that have already been shepherded through the riskiest stages of their development by other companies.

That’s in contrast to Ian Read, Pfizer’s 62-year-old CEO. When Read took over Pfizer in 2010, he declared reigniting a moribund research engine that had produced no important new medicines in a decade as one of his most important tasks.

Since then, Read can claim credit for the regulatory approval of 10 new medicines, including breast cancer drug Ibrance, which analysts forecast will eventually generate $5 billion a year, and Trumenba, a meningitis vaccine, both products of Pfizer labs.

Some Pfizer insiders don’t see Saunders as a good match for the 166-year-old company, whose expected revenue of $48 billion this year is about three times as much as Allergan’s.

“Saunders is not going to come to Pfizer and get religion on the need for drug discovery. I would doubt that would happen,” John Lamattina, who served as Pfizer’s research chief between 2003 and 2007, said in an interview.

Saunders declined to discuss any future role he might assume. He said he believed he would in fact be able to fit in with a company that has discovery culture.

“I believe as an executive of any company, it’s your job to invest in things you do better than your competition and reassess things you don’t do better,” he said in the interview.

TOP-NOTCH EXPERTISE

In his meteoric career, Saunders has lead Bausch & Lomb, Forest Laboratories and Actavis, which took the Allergan name after acquiring the Botox maker this year, all in the past five years. While his faith in drug discovery credentials may be questioned, he is highly regarded among his peers as a CEO with top-notch operational expertise.

A protege of industry veteran Fred Hassan, who fixed Pharmacia and sold it to Pfizer, Saunders is credited with helping turn around struggling Schering-Plough and then leading its integration with Merck & Co (MRK.N).

When Actavis acquired Forest, Actavis CEO Paul Bisaro replaced himself with Saunders, who had previously sold Bausch & Lomb to Valeant Pharmaceuticals International Inc (VRX.TO). In a recent interview, Bisaro called Saunders the best young CEO in the industry.

“It just didn’t make any sense to let him get away,” said Bisaro, who remained as executive chairman.

To be sure, Saunders has also shown a determination to move away from commoditized offerings. Last July, just four month after Actavis acquired Allergan, Saunders agreed to sell Allergan’s generic drugs portfolio to Teva Pharmaceutical Industries Ltd (TEVA.TA) for $40.5 billion.

Despite their different backgrounds, Read may see Saunders’ skill set as complementary to his, some industry experts said. Raghuram Selvaraju, healthcare analyst with Rodman & Renshaw, said he believes Read would even be willing to cede his title to Saunders and become executive chairman.

“Ian’s main concern is to get lower taxes for Pfizer through an inversion. He would rather be able to say he pulled this tax inversion off, and now I’m going to let Brent crack the whip and wield the axe,” Selvaraju said, referring to the many job cuts that typically follow large mergers.

Saunders said he has known Read for many years, from the time they both sat on the board of PhRMA, the largest U.S. trade group for the pharmaceutical industry. He declined to comment further on his relationship with him in light of the ongoing deal talks.

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