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DBL%20Hendrix%20small.png College chemistry, 1983

Derek Lowe The 2002 Model

Dbl%20new%20portrait%20B%26W.png After 10 years of blogging. . .

Derek Lowe, an Arkansan by birth, got his BA from Hendrix College and his PhD in organic chemistry from Duke before spending time in Germany on a Humboldt Fellowship on his post-doc. He's worked for several major pharmaceutical companies since 1989 on drug discovery projects against schizophrenia, Alzheimer's, diabetes, osteoporosis and other diseases. To contact Derek email him directly: Twitter: Dereklowe

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May 2, 2014

Allergan: "Golf-Course Deprived"

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Posted by Derek

Here's a good one for you. Valeant is well-known as an outfit that largely scorns R&D, and cuts it whenever they buy someone. They do mergers and acquisitions to get the fruits of someone else's research instead. You know, sort of a mini-Pfizer. (If anyone at Pfizer is offended by that comparison, they should take a longer look in the mirror).

Right now, Valeant is trying to acquire Allergan, and no doubt they're going to do to them what they've done to everyone else they've acquired. One of the wasteful things that Valeant CEO Michael Pearson has said that he wants to cut immediately is the outrageous perk of Allergan's own golf course. He's made mention of it several times, as an example of how out-of-control the spending is there. Only problem is, as Ed Silverman points out here, is that Allergan doesn't have a golf course.

At a recent luncheon with analysts, however, Pearson was pressed for further details on expenses he would slash if the Allergan deal comes to pass. According to analysts who attended, Pearson repeatedly pointed to Allergan’s golf course as an example.

“Have you been to their headquarters? Have you seen their golf course? Yeah, they have a golf course,” Pearson said, according to an investor note from BMO Capital Markets analyst David Maris, who wrote that the Valeant chief executive repeated this assertion more than once.

But the Allergan golf course will not be on the list of items to be slashed, after all. Why? Allergan, which is best known for the wrinkle fighter Botox, insists that it does not own a golf course.

“For the record, we do not have a golf course or any interest in a golf course,” an Allergan spokeswoman writes us. “We are golf-course deprived.” She adds that the drug maker received several calls after the meeting from analysts seeking to verify the information.

But hey, if there's not a golf course, Pearson will no doubt find something else to cut if the takeover does in fact go through. His McKinsey training has served him well, and his machete is sharp. The prospect has Allergan going around ringing doorbells, asking if someone else would be interested in buying them. Anyone but Valeant. I can see why.

Comments (27) + TrackBacks (0) | Category: Business and Markets


1. Mind of Pearson on May 2, 2014 8:55 AM writes...

I don't get it - why should knowing things about companies you buy to rend and pillage be a functional requirement? I still get paid, right?

The way you guys talk, you'd think surgeons have to know what the parts they take out of people do. I don't get it. As long the patient weighs less than they did before they got on the table, and their insurance gets paid or their checks clear, it should be fine, no?

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2. Justin on May 2, 2014 8:59 AM writes...

No one better tell Pearson about the swimming pool on the roof then.

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3. SP on May 2, 2014 9:18 AM writes...

Aren't there securities regulators who frown on people making knowingly false public statements?

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4. Biotechtranslated on May 2, 2014 9:19 AM writes...

Valeant's entire strategy might be to acquire and slash, but hey, you have to give them credit for being honest about it.

Compare that to Pfizer who pretty much does the same, but talks and talks about it's "commitment to R&D" and how it is a leader in the "research-based pharmaceutical industry".

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5. ManDingo on May 2, 2014 9:43 AM writes...

J. Michael Pearson, is very short sighted, and I can't believe they call themselves a pharmaceutical company.... really more like a hedge fund or a micro bank that will at some point need a "bail out" from you and me. He looks like a tool that would attend Dook and I am sure he got rammed as a boy scout.

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6. Anon on May 2, 2014 9:45 AM writes...

I did a search and the only that I found was at their PA facility, which has an abandoned [no so nice...] course across the street.
4647 Saucon Creek Rd, Center Valley, PA 18034
There is however a country club about a mile away.

I feel bad for Valeant investors. You can really tell how much due diligence these folks have been doing for the M&A activities.

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7. Lexington Steele on May 2, 2014 9:46 AM writes...

Check out Valeant's mission statement below. At least they are honest and make no mention to patients who are suffering from disease or about doing any type of research or science based activity.

Valeant Pharmaceuticals International, Inc. is a diverse and decentralized pharmaceutical company that is committed to focusing on our key stakeholders while delivering consistently high performance. Our values provide the overall direction for our company, and provide us with the tools necessary to rise to any challenge by leveraging our collective hard work and effort along with our unwavering competitive spirit. Th

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8. Bausch on May 2, 2014 9:59 AM writes...

He knows exactly what to cut , but cutting the entire R&D pipeline to patch holes in their finance is not a good sales's pitch to the analysts.

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9. pgwu on May 2, 2014 10:22 AM writes...

I agree with #4. More mercenaries than missionaries in pharma mgmt nowadays. The scale from private equity/hedge funds seems larger in pharma M&A. One could argue they want to make this sector more efficient. But all the PE money into CROs recent years has not made the drug development cheaper. "This time it will be different", like they used to day.

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10. Hap on May 2, 2014 11:11 AM writes...

As long as it keeps paying people handsomely to convert useful companies to capital and wreckage, it will keep happening.

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11. mrtwoiron on May 2, 2014 11:41 AM writes...

Lewis Black could make a two - hour act out of this...especially the buzzword bingo - winning Valeant mission statement.

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12. Fat Old Man on May 2, 2014 12:26 PM writes...


I've been around long enough in different places to see unsuccessful strategies like

-'focus on our core strengths' (delete therapeutic areas)
-'shots on goal' (more projects in Phase 1 means more product launches)

Can anybody add more of them?

My 2 bullet points in post 7 lead to the inescapable conclusion that consolidation in this business will continue. And after all, do we really need any new drugs? There's enough people already, we'll just keep re-approving all the old ones.

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13. Fat Old Man on May 2, 2014 12:32 PM writes...

@11 sorry I meant for thi to go to another topic

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14. annonie on May 2, 2014 12:34 PM writes...

Seems to me that Allergan should quickly buy a golf course so that Valleant has a quick win to cut the perk, feel good, and possibly protect other parts of Allergan.

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15. Anonymous on May 2, 2014 12:41 PM writes...

I was thinking about the Valeant bid for Allergan and realized that my views on this are highly conflicted.

Several years back I bought 100 shares of Allergan because my wife was so excited about their product, BOTOX. Now thanks to Valeant, I will make a quick ~$4K on top of my long-term gains in the stock. This is pretty sweet. I, like most stockholders, will sell out to the Barbarians at the Gate and not look back at all the raping and pillaging that Valeant will reap upon Allergan. Now I do not know what future inventions will be lost or the consequences for patients. I do know that Allergan did not discover the original uses for BOTOX nor did their crack commercial guys originally support development of the cosmetic uses of the drug. I am not really sure what the world will lose here when the Valeant fire-breathing dragons burn Allergan R&D to the ground.

Ha but wait a second, I just remembered my wife loves their product. BOTOX is one of the reasons she looks 15 years younger than I do and no way will she abandon it. Now I understand Valeant is going to jack-up the price for BOTOX to extract the maximum value from their Allergan buyout for Valeant management ....and stockholders, patients be-damned. Best of all for Valeant, this stick-up (the A) can happen without limits for the cosmetic stuff. That means I am screwed in so many ways. I figure in about 3 years my after-tax profits from this transaction will be gone and BOTOX money black hole will rapidly grow more massive, as I pay an ever higher price for this stuff. If I just say no, I am toast at home. Damn you short term thinking!!

Maybe be people should think about this transaction only substitute anticancer drug for BOTOX in the discussion.

My one piece of advice for Valeant is I would not try to be cute here and save any money in CMC for BOTOX as there is not a lot of safety room on this product for a CMC screw-up. The resulting litigation will make the Robin's Dalkon Shield caused bankruptcy seem like small ball.

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16. Dr Manhattan on May 2, 2014 1:16 PM writes...

#12. One of my favorites was way back in the mid 1990's at BMS. OSB- "Opportunity Seeking Blockbusters". It meant that every project had to demonstrate a clear path to being an over $1 billion/yr. drug. We would only fund blockbusters from here on in. Of course we had a bunch of McKinsey consultants in with their Magic 8-Balls to tell us which compounds would be blockbusters. Will it be a blockbuster?
"You may rely on it" "without a doubt"

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17. will on May 2, 2014 1:45 PM writes...

Allergan moved their golf facilities to China a few years ago. Everyone now shoots 12 under par

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18. MedChem3000 on May 2, 2014 2:06 PM writes...

Allergan may not have a golf course but they still have a really nice softball diamond/soccer field at their main site in Irvine, CA.It is a pretty nice perk and it is surprising that they still have it given the cost of real estate in the OC.

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19. JT on May 2, 2014 3:38 PM writes...

Fred Hassan is on Valeant's BOD. He's well versed in how to acquire and slash.

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20. pharmaobserver on May 2, 2014 6:19 PM writes...

The pharmaceutical industry hasn't "gotten itself into anything". The "industry" merely enjoyed a SHORT period of success that has come and gone.

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21. newnickname on May 3, 2014 7:51 AM writes...

Slightly off topic, but please help: Pipeline pages, Comments and "Post a Comment" are not working reliably for me and several others. I variously get: a completely blank page; a partially loaded page; a page with some Comments (from the "Comments (#)" link, I'm expecting # (eg, "32") comments but the page only loads some number smaller than # (eg, "25") comments; partial pages rarely (never?) include the "Post a Comment" box (such as I'm typing in now).

Please ask Corante ITS to fix this problem.


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22. Erebus on May 4, 2014 2:26 AM writes...

I'm experiencing the same issues mentioned in post #21.

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23. Anonymous on May 4, 2014 1:34 PM writes...

21 & 22 Snap for me. I though it must be something to do with my ipad, but clearly not...

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24. Fat Old Man on May 4, 2014 9:07 PM writes...

I agree with 21 & 22. The responder posts are frequently truncated or missing. It happens across platforms, PC or Apple, any browser I try, different wi fi systems, and several devices, some of which I have never used to post back. But at least Derek's main post is almost always available. That's the important part, not our pathetic replies.

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25. Fred the Fourth on May 4, 2014 9:36 PM writes...

21-24 & Derek: FWIW I have never seen any of those problems, using Win 7 and 8, and Firefox and Chrome.

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26. srp on May 5, 2014 7:09 PM writes...

I work in Irvine, so naturally nobody is excited about this deal, but I don't get what wonderful things Allergan has done in the R&D area that people are eager to have them do more of it. They bought up a drug developed by others whose most lucrative market was discovered by others and they ran with it. Good for them, but if they are taking a large portion of the proceeds and pouring it down a rat hole then stopping this would seem like a Good Thing.

You can't consistently criticize evil stupid McKinsey R&D management at pharmas and then cheer on their continuation.

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27. simpl on May 7, 2014 4:11 AM writes...

Responding to srp's question on Allergan R&D - you are correct that they have not done so much in the way of new molecules, with the possible exception of bimatoprost.
However, their skill in developing new and difficult indications has been around for decades.

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