After falling behind Johnson & Johnson last year, Novartis has once again claimed the mantle of Most Admired Pharmaceutical Company in a poll of Med Ad News readers. J&J (jnj.com) drops back to third place behind Genentech Inc., which also claimed the top spot as Most Admired Biotechnology Company for the sixth consecutive year. In the biotechnology category, Amgen Inc. (amgen.com) took the runner-up position, followed by Genzyme Corp. (genzyme.com). For the second consecutive year, Allergan Inc. was voted Most Admired Specialty Company. In fact, the entire top four was a repeat of last year in the specialty field, with Shire Plc. (shire.com) taking the No. 2 spot followed by Teva Pharmaceutical Industries Ltd. (tevapharm.com) and Alcon Inc. (alcon.com).
The three companies voted as Most Admired winners are profiled within this article. Novartis was featured in the September 2008 Top 50 Companies issue of Med Ad News, where readers can find out more details about Novartis’ financial and product performances.
Genentech also was written up in Med Ad News’ September magazine as part of the Biotechnology round-up. Certain company details not found in this special feature are published in that forum.
Allergan financial data were cited in Med Ad News September, but the company was not profiled in that edition. Therefore, this article contains more product and sales information about Allergan than for Novartis and Genentech.
MOST ADMIRED
PHARMACEUTICAL COMPANY
NOVARTIS
Novartis provides healthcare products across a broad portfolio that includes innovative medicines, preventive vaccines and diagnostic tools, generic pharmaceuticals, and consumer-health products. The company’s businesses are divided on a worldwide basis into four operating divisions: Pharmaceuticals (brand-name patented pharmaceuticals), Vaccines and Diagnostics (human vaccines and blood-testing diagnostics), Sandoz (generic pharmaceuticals), and Consumer Health (over-the-counter medicines, animal-health medicines, and contact lenses and lens-care products).
Novartis’ strategy is to strengthen this healthcare portfolio through investments in innovation, as well as through targeted acquisitions. The company completed a series of targeted acquisitions and strategic investments in 2008, led by the purchase of Alcon Inc. from Nestlé SA. Also in 2008, Novartis acquired Speedel Holding AG of Switzerland, gaining full control over future development of the novel antihypertensive Tekturna/Rasilez. In addition, the acquisition of Protez (protez.com) provided access to the development project PTZ601 for severe bacterial infections. Novartis also advanced its respiratory drug-delivery capabilities through the acquisition of Nektar Therapeutics’ (nektar.com) pulmonary business, which was completed at the end of the year.
Net sales rose 9%, or 5% in local currencies, to $41.46 billion. Net income from continuing operations grew 25% to $8.16 billion in 2008. The company invested about $7.2 billion in research and development in 2008. With headquarters in Basel, Switzerland, Novartis employed about 96,700 full-time equivalent associates as of Dec. 31, 2008, and has operations in about 140 countries around the world.
For 2009, Novartis executives anticipate another year of record results in net sales and earnings. “All the elements for success are in place: products, resources, creative thinking, a determination to succeed through an even greater focus on our customers, as well as a competent management team that is distinguished by ambition and integrity,” says Daniel Vasella, M.D., chairman and CEO, Novartis (novartis.com). “I expect Joe Jimenez [CEO of the Novartis Pharmaceuticals Division] and the management team of the Pharmaceuticals Division to take advantage of the strong performance in the years ahead by investing in research and development, growth products, and strategic markets. This will help to ensure that the Pharmaceuticals Division is prepared for the challenging period after 2012, when we can expect generic competition for our top-selling product Diovan. Our focused diversification strategy will also provide us with further growth opportunities beyond pharmaceuticals.”
Reputation with physicians
Novartis is earning its most-admired status not just in terms of financial success, but in relationship building as well. Physicians in four out of the five major European countries rate Novartis highly. According to research conducted by KantarHealth (kantarhealth.com) with more than 1,500 doctors in the United States and Europe, physicians in the United Kingdom, Germany, Spain, and Italy give Novartis top marks for effectively delivering key sales and service activities. The survey measured the performance of 17 top companies across ten areas, including rep conduct; rep knowledge and expertise; quality of sales visits; patient management, education and support; physician education and information services; practice and staff support services; Web-based services for physicians; Web-based services for patients; brand experience; and corporate reputation. The survey also assessed information channel preferences and evaluated the strength of physician/rep relationships for each measured company.
In 2008, Novartis and Merck & Co. tied for the top spot in the United States, with the highest ratings across all service activities. This year, Merck (merck.com) pulled ahead in the United States in the KantarHealth survey, with stronger ratings for both its Web-based physician services and its patient-information programs. But while Novartis’ relationship score has weakened in some other markets, it has soared in Spain, achieving the highest score earned by any company in any country.
Growth initiatives
Novartis executives believe that the company has one of the best portfolios to address the demands of the dynamically changing healthcare environment. Novartis is implementing longer-term strategic initiatives to create sustainable growth. Key actions include strengthening the healthcare portfolio, driving innovation through R&D investments, expanding in high-growth markets, and improving operational efficiency.
Each of the company’s four divisions is expected to play a significant role in the future success of Novartis. The strong performances of the Vaccines and Diagnostics and Sandoz Divisions in recent years reflect the positive impact of significant investments. The focused diversification also helps to balance industry risks.
The aim of the Pharmaceuticals Division is to provide patients and physicians with new and better medicines that deliver improved efficacy and fewer side effects as well as to address unmet medical needs. Novartis ranks as one of the top 10 companies worldwide based on sales of patent-protected medicines, with leading positions in cardiovascular and cancer treatments and an expanding presence in neuroscience. Viewed as having one of the most respected pipelines in the industry, Novartis will continue to invest heavily in R&D.
Executives are also reviewing ways to more efficiently support new product launches by using new selling models and advanced marketing tools, particularly in the United States and Europe. The company is also committed to being a preferred partner for strategic alliances with biotechnology companies, both for development compounds and new technologies.
Novartis has been building capabilities and expertise in biologic therapies, which now represent 25% of the company’s preclinical pharmaceuticals research portfolio. Novartis formed the Novartis Biologics Unit in 2007, establishing a dedicated innovation team with a strong biotech culture in the areas of discovery and development unique to biologics.
With the acquisition in 2005 of two leading generic pharmaceuticals companies – Hexal AG and Eon Labs Inc. – Sandoz became the world’s second-largest generics company. Competitive advantages include strengths in difficult-to-make generics, particularly extended-release formulations of medicines and biosimilars. Given these capabilities, which provide access to higher-value areas of the generic pharmaceuticals market, Sandoz is expected to become an increasing contributor to Novartis’ future results of operations.
The Consumer Health Division comprises the OTC, Animal Health, and CIBA Vision Business Unit. These businesses have gained market share in their respective segments through a focus on strategic brands, product innovation, and expansion in emerging markets. While divesting non-healthcare activities, these three businesses have been strengthened through targeted acquisitions. For example, the North American rights to various OTC products were acquired in 2006 from Bristol-Myers Squibb Co. (bms.com), while the acquisition of Sankyo Lifetech’s animal-health business in Japan in 2007 expanded the geographic presence of Animal Health.
Novartis is expanding in high-growth markets around the world, particularly in a number of the seven leading countries of Brazil, China, India, Mexico, Russia, South Korea, and Turkey identified by IMS Health (imshealth.com) as important to the healthcare industry. Even in light of the weakened economic conditions in some of these countries, Novartis executives believe that these long-term investments are crucial to capturing market share and being well-positioned for the eventual economic recovery.
Novartis has been taking significant actions to increase its presence in a number of these priority markets as well as adapting commercial models to better meet the needs of other emerging markets. A new cross-divisional operation was created in 2007 to accelerate growth in smaller emerging markets and better position the presence of all Novartis products. These areas include Northern and Sub-Saharan Africa, Central Asia, and some countries in Southeast Asia. The Pharmaceuticals Division is also undertaking aggressive investments to accelerate growth in China, Russia, South Korea, and Turkey. Sandoz (sandoz.com) continues to expand leadership in Central and Eastern Europe.
During 2008, Novartis generated about 64% of the company’s net sales from continuing operations in the world’s seven largest developed markets, while 10% of net sales came from these seven leading emerging markets. At the same time, combined net sales in these seven priority emerging markets grew 18% in local currencies in 2008 compared with 1% in local currencies in the seven largest developed markets. Emerging markets in general accounted for about 24% of Novartis’ net sales in 2008 compared with 22% in 2007.
Novartis is constantly exploring ways to improve productivity. In particular, executives are taking actions to improve competitiveness through Forward, a company-wide initiative that has streamlined organizational structures and changed the way the company operates. This initiative is expected to generate significant cost savings and help prepare Novartis for future growth.
As part of this initiative started in December 2007, Novartis has been streamlining and simplifying organizational structures in the corporate headquarters as well as in the Pharmaceuticals and Consumer Health Divisions. These initiatives have removed management layers, eliminated structural duplications, and reduced resources used for general and administrative functions.
Executives are also evaluating and optimizing supply networks worldwide. Initiatives are progressing rapidly to standardize and streamline shared functions such as procurement, information technology, and financial-transaction processing to generate benefits in cost management and economies of scale. Some administrative activities are also being outsourced or transferred to lower-cost countries.
Through these initiatives, the aim is to reduce the company’s cost base by about $1.6 billion by 2010 compared with 2007 levels. Annual cost savings of about $1.1 billion were achieved in 2008, exceeding the planned target of $670 million, mainly on the strength of accelerated procurement savings.
In order to implement these efficiency measures, Novartis recorded a restructuring charge of $444 million in 2007 that included plans for the reduction of about 2,500 full-time equivalent positions, or about 2.5% of the company’s worldwide work force at the end of 2007. A majority of these reductions were achieved through natural attrition and vacancy management.
Separate initiatives are under way to find more efficient marketing approaches to support new product launches. Novartis executives believe that a strong marketing message and rapid penetration of multiple geographic territories are vital for a product to attain peak sales as quickly as possible before the loss of patent protection or the entry of competitive products. Executives continually evaluate marketing models in the divisions and adjust the composition of sales forces, as appropriate.
A new program called the Customer Centric Initiative was launched in October 2008 to implement a new regional U.S. business model in the Pharmaceuticals Division designed to better address customer needs and increasing differences among the needs of local markets. Five new regional units have been created with cross-functional responsibility for the full primary-care product portfolio, replacing nationally managed sales forces. This new model is designed to be more effective at driving sales growth by better meeting the diverse and specific needs of customers as well as deploying resources more efficiently. As part of this initiative, about 550 full-time equivalent positions were eliminated in the U.S. sales organization, with more than half achieved by not filling vacant positions. The new organization started Jan. 1, 2009. A one-time charge of $19 million was taken in the fourth quarter of 2008, with annual cost savings of $80 million anticipated starting in 2010.
Corporate citizenship and awards
Corporate citizenship at Novartis rests on four pillars: commitments to patients, to people and communities, to the environment, and to ethical business conduct.
Novartis has developed several programs aimed at enhancing affordability and access to treatment. One program is the Novartis Institute for Tropical Diseases, where Novartis researches novel treatments and prevention methods for neglected tropical diseases such as Dengue fever, and will make these available, without profit, to poor endemic countries.
In July 2009, Novartis extended its tuberculosis drug donation to Tanzania. Novartis has already delivered nearly 250,000 tuberculosis treatments to Tanzania between 2005 and 2008. With the new Memorandum of Understanding, Novartis committed to extend the donation, delivering another 250,000 treatments during the next three to four years. This donation is worth about $6 million and aims to treat an estimated 60,000 patients per year.
Other access-to-medicine programs include providing free leprosy medications until the disease is eradicated worldwide, providing global access to its breakthrough cancer therapy Glivec free to patients in need, as well as distributing the anti-malarial drug Coartem below cost to poor patients.
Treatments worth $1.26 billion were contributed through access-to-medicine programs in 2008, reaching 74 million patients in need. In April 2008, Novartis announced a 20% average reduction in the price of Coartem, made possible through efficiency gains in production at state-of-the-art facilities in China and the United States. In December 2008, Swiss health authorities approved a new pediatric formulation of Coartem designed to enhance taste and convenience for young children who are especially vulnerable to malaria. The dispersible formulation is a joint development by Novartis and Medicines for Malaria Venture, a nonprofit foundation dedicated to the development of affordable new antimalarials.
During May 2009, B’nai B’rith International chose Dr. Vasella to receive its Distinguished Achievement Award. Dr. Vasella and Novartis were honored for a strong and continued commitment to access-to-medicine programs for patients around the world. B’nai B’rith (bnaibrith.org) is one of the world’s oldest and largest human rights, community action, and humanitarian organizations.
In Brazil, the local Novartis organization has added more than 80 disabled people to its payroll, in line with national legislation to step up recruitment of people with disabilities; more than 20% of the new disabled employees at Novartis are sales representatives, calling on healthcare professionals.
Novartis issues Energy Excellence guidelines for buildings and equipment worldwide, aiming to ensure efficient, cost-effective, and climate-conscious use of energy.
The Novartis Pharmaceuticals Division has updated and broadened its Business Practices Policy to set additional global standards for promotional and non-promotional activities, such as interactions with healthcare professionals and patients and the donation of grants.
In 2008, Novartis achieved top-level positions in influential rankings and was named healthcare super sector leader in the 2008 update of the Dow Jones Sustainability World Index. The company moved up five positions, to No. 20, in the Barron’s magazine list of the world’s most respected companies. Novartis ranked No. 2 among pharmaceutical companies in Fortune magazine’s list of “World’s Most Admired Companies” and was again included in the 2008 “World’s Most Ethical Companies” list from Ethisphere Institute.
Novartis also received the China Charity Award, the country’s highest honor, ranking No. 1 in the category “Most Caring Foreign-Invested Enterprise.” The award, established by the Chinese Ministry of Civil Affairs, recognizes social responsibility programs at Novartis, especially immediate and sustained support of relief efforts in the wake of the earthquake that struck Western China in May 2008.
In December 2008, Novartis Pharmaceuticals Canada was named one of the 50 Best Employers in Canada, as determined by Hewitt Associates (hewittassociates.com). The company ranked No. 37 and moved up to the No. 5 position among Quebec companies. Novartis has 800 employees across Canada, including 350 at its head office in Dorval. Hewitt Associates cited Novartis Pharmaceuticals Canada for creating an environment that builds commitment from its employees through respectful management and a broad range of employee services and benefits. Earlier in the year, the company was selected by Benefits Canada magazine and Hewitt Associates for being among the top 30 organizations in Canada in providing the best pension and benefit plans.
MOST ADMIRED
BIOTECHNOLOGY COMPANY
GENENTECH INC.
Genentech is a biotechnology company that discovers, develops, manufactures, and commercializes medicines to treat patients with serious or life-threatening medical conditions. After the completion of its acquisition in March 2009, Genentech is now a part of the Roche Group (roche.com).
Genentech was founded in 1976, by the late venture capitalist Robert A. Swanson and the biochemist Dr. Herbert W. Boyer. In the early 1970s, Dr. Boyer and the geneticist Stanley Cohen pioneered a new scientific field called recombinant DNA technology. Upon learning about this development, Mr. Swanson placed a call to Dr. Boyer and requested a meeting. Dr. Boyer agreed to give the young entrepreneur 10 minutes of his time. Mr. Swanson’s enthusiasm for the technology and his faith in its commercial potential were contagious, and the meeting extended from 10 minutes to three hours; by its conclusion, Genentech was born. Though Mr. Swanson and Dr. Boyer faced skepticism from both the academic and business communities, they forged ahead with their idea.
The company’s goal was to develop a new generation of therapeutics created from genetically engineered copies of naturally occurring molecules important in human health and disease. Within a few short years, Genentech scientists proved it was possible to make medicines by splicing genes into fast-growing bacteria that produced therapeutic proteins. Today Genentech continues to use genetic engineering techniques and advanced technologies to develop medicines that address significant unmet needs and provide clinical benefits to millions of patients worldwide.
Research and development
For more than 30 years, Genentech has been dedicated to rigorous and groundbreaking science. The company’s emphasis on strong basic research combined with an applied focus on medical needs has been instrumental to its success and growth. Genentech’s Research department includes about 1,100 researchers, scientists, and postdocs.
The company’s goal in setting strategy for the research department is to strike the optimal balance between basic biomedical research and translational research aimed at developing therapies for unmet medical needs. Genentech also explicitly fosters individual creativity and initiative among its researchers, encouraging scientists to pursue projects of interest in addition to working toward the company’s goals. As a result, the company’s scientists have consistently published important papers in prestigious peer-reviewed journals. In addition, Genentech’s scientists have secured about 7,400 current, non-expired patents worldwide and have about 6,250 patent applications pending worldwide.
A primary mission of Genentech’s research department is to keep the company’s product pipeline full. This entails moving new research projects into development each year, expanding indications and markets for current products, and supporting development projects. Genentech’s leaders are also committed to expanding the scientific and technological leadership of the company by helping current employees reach their full potential and recruiting new research talent. In an effort to develop young scientists interested in biotechnology, Genentech has a strong postdoctoral program, with fellowships that typically last four years. The primary aim of the program is for Genentech scientists to train postdocs to conduct research of the highest possible quality in scientific areas of interest to the postdoc and the company. Throughout the program, fellows are encouraged to present the progress and results of their work both internally and externally as well as to attend seminars, collaborate with other scientists, and, when possible, manage others. Overall, the Genentech postdoc program is designed to create a vibrant and supportive environment for rigorous scientific training.
To ensure continued scientific excellence, in October 1992 Genentech opened the Founders Research Center, a 275,000-square-foot facility devoted solely to biotechnology research. The facility was dedicated to Mr. Swanson and Dr. Boyer in honor of their pursuit of the promise of biotechnology when they established Genentech in 1976. In April 2001, the company celebrated its 25th anniversary by breaking ground on a 280,000-square-foot expansion of the Founders Research Center. Completed in 2003, the 555,000-square-foot complex houses specialized laboratories and state-of-the-science equipment in several interconnected buildings. In 2007, Genentech opened a southern campus extension that comprises more than 230,000 square feet of additional specialized laboratories.
Genentech’s leaders are intent on providing the company’s researchers with access to the most advanced technologies and biological information necessary to optimize their research productivity. All of Genentech’s scientists have access to state-of-the-art DNA sequencing, microarray, and bioinformatics support as well as a fully integrated mouse genetic engineering facility. In collaborative efforts between various departments at Genentech, these tools are being used in efforts such as the function identification of a large number of genes of interest to the company’s discovery efforts, building better mouse models of human disease or the identification of specific somatic mutations, and copy number changes in the genome of a number of tumor types.
In 2008, Genentech invested $2.8 billion, or 21% of operating revenue on a GAAP basis, into research and development, significantly more than the pharmaceutical industry average. To balance resource use with the strongest likelihood of success, Genentech continuously evaluates its pipeline products in order to determine which are the most promising projects to move through the many phases of clinical testing. The company’s development pipeline continues to grow, now numbering more than 100 projects in oncology, immunology, disorders of tissue growth and repair, and neuroscience. The pipeline includes both breakthrough innovations and new indications for existing, well-understood products that may fight more than one disease or more than one form of a disease.
Manufacturing and commercialization
Genentech was the first biotechnology company to scale up protein manufacturing successfully from the small quantities used for research to the much larger quantities needed for clinical trials and marketing. The company is a world leader in biotech manufacturing, with more FDA-approved manufacturing capacity for the production of biotech medicines than any other company. During the last two decades, Genentech has built world-class production facilities, developed expertise in commercially viable manufacturing processes, and also attracted and retained key personnel with experience in all aspects of large-scale biologics manufacturing. Genentech’s manufacturing expertise and capacity, about 330,000 liters of installed fermentation capacity, provide important competitive advantages in the maturing biotechnology industry and position the company well to meet the demands of its promising product pipeline. Genentech has three manufacturing facilities in California: South San Francisco, Vacaville, and Oceanside. In 2004, the company began construction on an expansion to its Vacaville site, which, when completed, will be the largest biotechnology manufacturing facility of its kind in the world. Genentech acquired the Oceanside biologics manufacturing facility in June 2005 and received FDA licensure in April 2007. In March 2006, the company announced the purchase of property in Hillsboro, Ore., for the construction and development of a fill/finish facility. Construction is progressing at the location for the fill/finish facility, and the warehouse and distribution center became operational in July 2008. In November 2006, Genentech and Lonza (lonza.com) entered into a supply agreement for the manufacture of Avastin at Lonza’s facility currently under construction in Singapore. When completed, the 80,000-liter facility will be the first large-scale bulk biologics manufacturing plant in Singapore, with FDA licensure expected in 2010.
The commercial group plays a crucial role in bringing Genentech’s therapies to its customers by transforming the company’s scientific innovations into changes in the practice of medicine that enhance and extend patients’ lives. The group’s primary focus is to market and sell novel, targeted therapies for disease areas with unmet needs. The development and implementation of commercial strategies involves collaboration across a variety of teams with dedicated expertise. These dialogues are supported by intensive market planning to ensure thoughtful understanding of each therapeutic area and customer group and by continuing examination of broad healthcare marketplace trends.
Awards
Genentech has received a long list of employer-related honors. In January 2009, Fortune magazine named Genentech one of the “100 Best Companies to Work For” for the 11th consecutive year, ranking the company No. 7 on the list. Genentech is the only company in the biotech industry that has appeared on the list for 11 consecutive years. In October 2008, Genentech was named “top employer in the biopharmaceutical industry” by Science magazine. This is the seventh year Genentech has appeared on the list and the sixth No. 1 ranking for the company. And in September 2008, Working Mother magazine named Genentech one of the “100 Best Companies for Working Mothers.” This is the 16th year Genentech has appeared on the list.
The company has also earned a number of corporate honors. In March 2008, Fortune named Genentech No. 1 in the Pharmaceuticals category on its 2008 list of “America’s Most Admired” companies. This is the third year Genentech has qualified for the list and the second year in a row the company has ranked No. 1. In May 2008, Barron’s magazine named Genentech No. 41 on its annual “500 Best American Companies” list. Genentech was the top ranking biotech/pharmaceutical company on the list. And in July 2009, the San Francisco Business Times named Genentech No. 9 on its list of Top Bay Area Corporate Philanthropists at the annual Bay Area Corporate Philanthropy Summit and Awards. This is the third year Genentech has ranked No. 9 and the fourth consecutive year the company has appeared on the list.
Several Genentech senior staffers have earned honors for their work as well. In April 2009, Genentech’s chairman and CEO Arthur D. Levinson, Ph.D., was named to Institutional Investor magazine’s “America’s Best CEOs” List. Dr. Levinson ranked as the No. 2 CEO in Biotechnology, a sub-category of the Healthcare category. This is the second year that Dr. Levinson has ranked No. 2 in the Biotechnology category. In March 2009, Dr. Levinson was named to Barron’s list of 30 “World’s Best CEOs,” the second time he has appeared on the list.
In its October 2008 issue, Fortune named Susan Desmond-Hellmann, M.D., president of Product Development at Genentech, one of the 50 most powerful women in American business. Ranked No. 13, Dr. Desmond-Hellmann appeared on the list for the seventh time.
Corporate citizenship
Because Genentech is committed to people having access to its medicines when they need them, the company has created a set of programs to ensure price is not a barrier to access for patients. Through the company’s Genentech Access Solutions program, Genentech provides patients and healthcare providers with coverage and reimbursement support, patient assistance, and informational resources. This support is available for eligible patients in the United States who do not have insurance coverage or who cannot afford their out-of-pocket co-pay costs. Since 1985, when the company’s first product was approved, Genentech has donated about $1 billion in free medicine to uninsured patients through the Genentech Access to Care Foundation and other product donation programs. Additionally, since 2005, the company has donated more than $140 million to various independent non-profit organizations that provide financial assistance to eligible patients who cannot access needed medical treatment due to co-pay costs.
Genentech also provides support to organizations that help patients understand and cope with their diseases. The company’s patient-health programs enhance education and awareness and ensure that patients are able to access effective medical therapies and necessary support systems. An example of one of these programs is “Strike Out Cancer,” an education program that partners with a leading non-profit organization to encourage people affected by cancer to learn about new approaches, support networks, and educational resources.
Beyond patient programs, Genentech donated more than $33 million to support a wide range of educational and community initiatives in 2007. The company supports educational programs that encourage the pursuit of scientific and medical innovation, from elementary school to the postgraduate level. Genentech also makes donations to local organizations and events, supports group employee volunteer activities, and creates its own programs to meet the specific needs of its communities. One such initiative is “Genentech Goes to Town,” a program that provides $25 in special GenenMoney to employees during a two-week period to encourage support of local merchants and the continued development of business areas in the company’s communities.
MOST ADMIRED
SPECIALTY COMPANY
ALLERGAN INC.
Allergan discovers, develops, and commercializes products in the ophthalmology, neurosciences, medical dermatology, medical aesthetics, obesity intervention, urologics, and other specialty markets that deliver value to its customers, satisfy unmet medical needs, and improve patients’ lives. In addition to its discovery-to-development research programs, Allergan has global marketing and sales capabilities, with a presence in more than 100 countries. The company employs about 7,000 people worldwide and operates world-class research and development facilities and several state-of-the-art manufacturing plants.
Allergan is a global, technology-driven multi-specialty healthcare company pursuing therapeutic advances to help patients live life to their fullest potential. In making this commitment, the company is working to develop an unparalleled level of insight into patients’ wants and needs – and into the priorities and concerns of the medical specialists who treat them. To this end, Allergan employs more than half of its work force in either research and development or sales, ensuring that the company’s efforts are focused on innovation and its customers.
Allergan’s flagship franchises in eye care, neurosciences, medical dermatology, and urologics are structured under the company’s pharmaceutical business portfolio, Allergan Pharmaceuticals. This portfolio offers specialty physicians and their patients a wide range of treatments to help preserve and protect sight, reduce physical disability, and enhance quality of life.
With the acquisition of Inamed Corp. in 2006, Allergan added breast aesthetics and dermal fillers to its business portfolio to create a world-leading medical aesthetics franchise. The acquisition also brought Allergan a leading product portfolio in obesity intervention that offers minimally invasive devices to help patients achieve sustained weight loss and reduce health risks associated with obesity. All of these products are now represented within the Allergan Medical corporate division.
With specialty product lines focused on high-growth markets, Allergan represents a new multi-specialty healthcare model for the future, where diversification and focus live together to offer physicians and patients best-in-class treatments and a robust pipeline for continuous innovation. Bolstered by an integrated R&D organization and global infrastructure, characteristics of some of the industry’s largest pharmaceutical companies, Allergan also maintains a lean and efficient operation with solid growth prospects, like many smaller and more specialized organizations in the healthcare field. Allergan is large enough to command sufficient resources to address significant patient needs, yet small enough for nimble execution. Looking to the future, Allergan will continue to follow its R&D technologies into additional specialty areas and build a leadership presence of relevance to the doctors and patients the company serves.
History
The innovative spirit that infuses Allergan today can be traced back to Allergan’s founder, pharmacist Gavin S. Herbert. In 1948, Mr. Herbert was already the successful owner of a chain of drug stores in Los Angeles. But his interest and entrepreneurial instincts were ignited when a close friend and chemist, Stanley Bly, approached him with an idea for an anti-allergy nose drop containing the antihistamine neoantergan. They set up a small laboratory on the balcony of Mr. Herbert’s drugstore in Los Angeles to make the solution, which they named Allergan Nasal Drops.
Responding to the suggestion of an ophthalmologist friend, Mr. Herbert and Mr. Bly later reformulated the product as an eye drop to treat allergic conjunctivitis (inflammation of the eye). The result was Allergan, the first antihistamine eye drop in the United States. As would be repeated time and again over the years, the new company achieved success by responding to the suggestions of its customers. The successful launch of Allergan effectively announced Mr. Herbert’s entrance into the specialty field of ophthalmology and also became his new company’s moniker when he established Allergan Pharmaceuticals Inc. in 1950 to pursue the potential of this and other therapies he and Mr. Bly would develop.
Mr. Herbert continued to focus Allergan on the discovery and development of novel formulations for specialty markets, and on close collaboration with physicians and the scientific community to make these products better. By 1953, Allergan was producing its eye drops and formulating new products such as the first cortisone eye drop to treat allergic inflammation and the first ophthalmic steroid decongestant.
In 1957, Mr. Herbert turned the company over to his son, Gavin Herbert Jr. Like his father, the second Mr. Herbert used insights gained by actively listening to physicians and patients and consulting with specialists and researchers to guide the development of innovative new products in areas of unmet medical need. Many Allergan “firsts” – innovative products that advance patient care – have followed since, both under the direction of Gavin Herbert Jr., who remained at the helm until the mid-1990’s, and presently David Pyott, who joined Allergan as president and CEO in 1998 and now serves as chairman of the board and CEO.
Since arriving at Allergan, Mr. Pyott has reorganized and streamlined the company to reveal its strong entrepreneurial roots. He also has re-energized the company around the founders’ original vision for a fast and responsive, customer-focused way of doing business. In doing so, Mr. Pyott has helped Allergan build on its multiple strengths and move decisively into exciting new areas of specialty medicine where opportunities to truly make a difference in patients’ lives are greatest. Today Allergan represents a global, $4.4 billion multi-specialty healthcare company with leading portfolios in eye care, neurosciences, medical dermatology, medical aesthetics, obesity intervention, and urologics.
Financial performance
After the strong 29% sales growth Allergan enjoyed in 2007, 2008 was a challenging year financially given the worldwide economic downturn. However, 2008 also represented a time for reflection and assessment of the company’s short-tern and long-term opportunities, enabling Allergan to emerge from 2008 stronger and better prepared for the challenges ahead. According to company leaders, Allergan draws stability, strength, and value from its Growth Equation – a business model that balances diverse specialties with a focused approach and a leadership presence in world markets.
Allergan’s sales totaled $4.4 billion in 2008, an improvement of 11.8% compared with the previous year. The company’s actual sales growth, though, was quite different from expectations at the start of the year, particularly with regard to continued strong expansion of the medical aesthetics business that includes Botox Cosmetic, dermal fillers, and breast aesthetics. Late in the first quarter, the company began to experience the impact of cutbacks in U.S. consumer spending on these elective cash pay businesses. From mid-year onward, Allergan increasingly experienced the effects of a global recession, especially in Europe. Beyond medical aesthetics, the economic currents also challenged the company’s growth expectations for its obesity intervention portfolio, specifically the Lap-Band Adjustable Gastric Banding System. For the Lap-Band System, about a quarter of the company’s business is currently cash pay, and when reimbursed, the typical co-payment is in the range of $2,000 to $4,000. In tough economic times when consumers are reducing personal expenses, growth for a product like the Lap-Band System is also negatively affected.
Even with these challenges, first-half 2008 net sales growth was still strong at 21% compared with the corresponding period of 2007, while second-half net sales growth was moderate at 3% with weak consumer demand being amplified by the strength of the U.S. dollar versus foreign currencies. Thanks to the company’s reliable forecasting systems, Allergan initiated strong expense controls from mid-year onward, which permitted the company to deliver adjusted earnings-per-share growth of 18% for the full year. Allergan’s pharmaceutical businesses increased 13% over 2007 on a constant currency basis, compared with a worldwide pharmaceutical industry growth rate of 4%. Given the high investments Allergan made in prior years in sales-force expansions and substantial direct-to-consumer advertising budgets for its consumer-oriented brands, company leaders believe that Allergan possesses the strategic flexibility to streamline these cost areas, reducing many optional programs while protecting long-term investments in R&D.
Corporate citizenship
The Allergan Foundation is a U.S.-based, private charitable foundation established by Allergan in 1998 with a mission to make a positive and lasting impact on the community. The Allergan Foundation lends philanthropic support and involvement to organizations working hard to make the lives of individuals healthier and happier and to make their communities better places to live, now and in the future.
Since inception, The Allergan Foundation has made grants of almost $12 million, focusing support in four philanthropic areas: the arts, civic programs, education, and health and human services. As part of The Allergan Foundation’s commitment to health and human services, the Foundation also supports selected initiatives, known as “Focus Grants,” to improve patient diagnosis, treatment, care, and quality of life, or to otherwise promote access to quality health care. Every organization receiving support from The Allergan Foundation is dedicated to addressing unmet needs in its community, and Allergan is proud to support the Foundation in that effort.
Allergan also participates in three programs designed to provide access to the company’s medications and treatments for those facing financial distress. To help ensure that Allergan’s eye care and medical dermatology products are available to those in financial need, the company participates in RxHope.com. The only program of its kind supported by both Pharmaceutical Research and Manufacturers of America and participating pharmaceutical companies, RxHope is the largest independent Web-based patient-assistance program resource, processing and fulfilling thousands of requests every day.
For more than a decade Allergan has helped many patients who depend on Botox treatment for serious or debilitating medical conditions have access to needed therapy regardless of their ability to pay. The Botox Patient Assistance Program provides Botox therapy at no charge to financially eligible patients who are either uninsured or underinsured.
The Cervical Dystonia Fund, a patient-assistance program dedicated to assisting insured patients who cannot afford the out-of-pocket costs associated with any FDA-approved treatment for cervical dystonia, is available through the National Organization of Rare Disorders Inc. (rarediseases.org). The NORD is an independent, nonprofit 501(c)(3) organization. Allergan is a proud sponsor of this program.
