David Pyott says he would have done a few things differently leading up to his ultimately successful attempt to beat back a hostile takeover attempt of Allergan Inc. about two years ago.
The drugmaker’s longtime chief executive talked strategy and other matters during an appearance last week at an ophthalmology industry summit at the Center Club in Costa Mesa hosted by Aliso Viejo-based nonprofit advocacy group OCTANe.
Pyott was interviewed by good friend and former colleague James Mazzo, who spent over 20 years at Allergan. Mazzo is now chief executive of Irvine-based AcuFocus Inc., maker of the Kamra inlay for correcting presbyopia, and served as co-chairperson of the summit.
Allergan [now Allergan PLC], under Pyott’s direction, spent much of 2014 fighting against Canada-based Valeant Pharmaceuticals International Inc. and activist investor Bill Ackman’s Pershing Square Capital Management LP in their attempt to buy out the drugmaker.
Pyott referred to the alliance between Valeant and Ackman, who at the time was Allergan’s largest shareholder with a 10% stake, as “a very interesting concoction of an activist teaming up with a strategic.”
The battle lasted nearly seven months and featured scabrous attacks between the parties before ending in November 2014 when Actavis PLC, a drugmaker based in Ireland and operating out of New Jersey, made an offer for Allergan that’s currently valued at $72.5 billion.
The combined company eventually took the Allergan name and has maintained Allergan Inc.’s former Irvine headquarters campus on Dupont Drive as its hub for eye drugs, dermatology and medical aesthetics, including flagship Botox.
Hindsight
The urbane executive, looking relaxed in a navy blazer and a plaid shirt, was asked by Mazzo if there had been warning signs that Valeant was building toward a takeover attempt prior to the April 2014 announcement.
“In many ways, in American history, it felt very much like 1941,” Pyott said in his signature Scottish brogue, referring to the buildup to America’s involvement in World War II.
He later related a comment by then-Valeant chief executive Michael Pearson that, “‘One day, I want to be just like Allergan.’ I suppose admiration can go a little bit out of control.”
Pyott later praised former company president Douglas Ingram, who was in charge of day-to-day operations while Pyott spent “98%” of his time fighting the takeover bid, which he called “a complete robbery of the company” at $49 billion, referring to Valeant’s first offer.
“This was a huge tribute to the Allergan team,” he said of Ingram—now chief executive of Irvine-based Chase Pharmaceuticals Inc.—and company directors and others’ work in keeping Allergan’s operations humming.
“We had our best operating year in the 61 years of Allergan’s history,” Pyott said, pointing out that Allergan’s 2014 revenue grew by $1.1 billion to $7.1 billion.
Missed Opportunities?
Mazzo also asked Pyott about lessons he learned in the takeover battle.
“We should have been more aggressive ourselves with acquisitions,” Pyott said, noting that Allergan had $4 billion in cash on its balance sheet prior to the Valeant situation.
Pyott, who spent 17 years as Allergan’s chief executive, told the Business Journal in early 2014 that the drugmaker was interested in making deals.
Allergan was “already growing in the low-double-digits in revenue,” something Pyott suggested may have played a role in its cautiousness.
“Unless you plan to do this time and time again, you better make damn sure that” any potential acquisition target is growing at a similar rate, he added.
“We’ll talk about Pfizer [Inc.] later on,” Pyott said, referring to the New York-based drugmaker’s aborted attempt to buy Allergan late last year.
He said Allergan walked away from buying Raleigh, N.C.-based Salix Pharmaceuticals Inc. in 2014, a few months before it agreed to an Actavis buyout.
Salix’ shares fell sharply following reported operating losses and an imbroglio over its inventory reporting that led to an audit, a shareholder suit, the retirement of the company’s chief executive, and the resignation of its chief financial officer. Valeant acquired Salix last year.
Thoughts on Pfizer
Pyott eventually circled back to the failed Pfizer purchase.
The maker of Viagra and other drugs had planned to buy Allergan in a $160 billion mega-deal that fell apart in April, when regulators changed anti-tax-inversion rules. Tax inversions have been heavily criticized by politicians across the spectrum, including presumptive presidential nominees Hillary Clinton and Donald Trump.
Pyott said he “kept well away” from the media during the Pfizer and Allergan situation.
“I was never a fan of Pfizer, I have to admit,” he said, citing the company’s “need for a serial acquisition but also worse—the need for inversion.”
“Beyond that, the synergies were very low.”
There were some light moments during the discussion, including Pyott’s joking about his command of multiple languages.
“The old story’s if you know English, Scottish and rubbish, you’re off to a fast start.”
The retired executive speaks German, French and Spanish, and understands Dutch.
