$9 Billion Bausch & Lomb Sale Mints New Turnaround Artist
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Brent Saunders
The $8.7 billion sale of Bausch & Lomb, which specializes in eye health, to Valeant Pharmaceuticals represents a triumph for Bausch’s chief executive, Brent Saunders, who took over after Bausch was taken private by a group of investors led by private equity firm Warburg Pincus.
Saunders, 43, comes out of the sale with a reputation similar to that of his mentor, Fred Hassan, who serves as Bausch’s chairman of the board and a partner at Warburg. Hassan turned around divisions at Wyeth and Sandoz. When he ran Pharmacia a decade ago, he pulled off a clever bit of M&A, buying Monsanto MON +0.36% to get its drug division, including the blockbuster Celebrex, then spinning off the agriculture unit and the Monsanto name.) He sold Pharmacia to Pfizer PFE +0.55% for $60 billion. Then he took over Schering-Plough, which was eventually sold to Merck for $41 billion.
Hassan met Saunders, then a PriceWaterhouseCoopers consultant, at a Leukemia and Lymphoma Society dinner when the younger man was doing work for Schering. He offered him a job as Schering’s Chief Compliance Officer, charged with ending a raft of illegal and unethical marketing practices. Initially, Saunders said no, but was then convinced to join and given authority to hire 100 compliance officers even when company headcount was dropping.
The Schering turnaround was cut short when controversy about Schering’s top drugs, Zetia and Vytorin, caused sales to drop. That led to the sale to Merck, which was the company’s partner on those drugs. Hassan took the job at Warburg, which took Bausch & Lomb private after problems with one of its lens cleaners led to potentially blinding eye infections. Hassan took over as chairman, and Saunders as chief executive.
Saunders increased the equity value of Bausch, as measured by the deal that closed today, by about 2.5-fold. Sales growth rose 9% a year, and earnings before interest, taxes, depreciation and amortization grows 17% a year. Some of the success came from a series of acquistions: Argentinian eye product maker Waicon in December 2011, opthamolagy laser maker Technolas Perfect Vision in November 2012, and ISTA Pharmaceuticals, a maker of eye drugs, in March 2012. The first two deal prices were not disclosed; the third was $500 million.
Bausch introduced 34 new products under Saunders’ leadership, including a new femtosecond laser for eye procedures the PureVision2 contact lens, and Prolensa, a new eye drug. In 2013 alone, seven major products were launched. Where Bausch’s product pipeline had once been seen as largely empty, there are now several promising products, including latanaprostene bunod, a new glaucoma treatment, mapracorat, fro allergic conjuctivitis and dry eye, and a new contact lens based on the first new contact lens material in 14 years.
Valeant is purchasing Bausch for $4.5 billion in cash plus the repayment of $4.2 billion of Bausch’s debt. Saunders will join Valeant in an “advisory role” for the transition. Investors will probably be watching to see where he goes next.
