Allergan Sidebar: Growth From Innovation
CEO David Pyott on the importance of R&D
A Los Angeles pharmacist founded Allergan Inc. (NYSE: AGN) in 1950 with a single product: antiallergy eyedrops. Since then, the company has grown into a global pharmaceutical firm offering hundreds of treatments, including Lumigan for glaucoma and the blockbuster Restasis for dry eyes, with a presence in more than 100 countries and annual revenues of $5.3 billion. Here, CEO David Pyott talks growth and R&D.
What goes into Allergan’s decision to expand into a new area?
Part of the decision comes from looking at our existing products. If we see a clear medical application within the channels of distribution we command, that’s clearly in our sweet spot.
Can you provide an example of that?
Urology is a good one. When you get approval for one use of a drug, you might be lucky to get a second or a third application approval. With our Botox business, we now have 25 licensed applications for different uses around the world.
One thing that Botox can do is relax muscles. We know this from treating patients who have upper limb spasticity — muscle stiffness in the elbow, wrist and fingers. Botox helps relax the contracting muscles. That made us ask the question: If we inject Botox into an overactive (contracting) bladder, what happens? Once we were convinced the application worked and was safe, we researched how big the market was and how much clinical trials would cost. The math all worked, and in 2011 we got FDA approval. That enabled us to develop urology as a whole new channel of business.
How does staying close to the customer help you grow?
Years ago, men using one of our glaucoma drugs were telling their eye doctors that one of the side effects was that their eyelashes were getting really long. The doctors shared that information with us, and now we have a $100 million product with Latisse, the only FDA-approved drug for inadequate eyelashes. We’re expanding Latisse to eyebrows — we hope to have FDA approval this year — and then to the scalp to treat hair loss. I’ve told the head of R&D for dermatology to get going on that one. I want to use it!
How have economic conditions affected your R&D spending?
We’re going to spend $1 billion on R&D in 2013, and that’s on top of the $900 million we spent in 2012. One area that we feel has enormous growth potential is retinal diseases, such as macular degeneration that mostly affects people over 50. Right now it’s a $4 billion global business for Allergan, but I think with an aging population it can be $20 billion in the next 10 years. My view is that the innovation that results from R&D — new and improved products that deal with real patient needs — will beat out a tough economy every time.