Allergan agreed last November to be bought by Irish firm Actavis for $66bn, putting an end to a takeover campaign lasting more than seven months waged by Valeant and hedge fund Pershing Square Capital Management.
Allergan’s CEO had refused Valeant’s offers, predicting the Canadian company would slash R&D if it acquired the Irish Botox-maker.
Speaking at Bio 2015 in Philadelphia in the same week Actavis announces its name change to Allergan, Pyott opened up about the difficulties of fending off hostile bids, and his lessons for the boards of big and small pharma.
‘Do your homework’
Pyott told the conference Valeant began takeover attempts because it “needed growth and to make their model work they needed to keep buying.
“It was clear looking back Valeant couldn’t take us on on their own” after it acquired Bausch & Lomb seven months before, “so that’s why it needed a team” with a hedge fund, said Pyott.
Dealing with shareholder activists – like Pershing’s CEO William Ackman – should become a CEO or Chairman’s first priority, he said.
“In our case a lot of people say the difference was that I [told] our Head of R&D and our President, ‘You’re going to run the company, I’m going to spend 95% of my time with Mr Ackman and Mr [Michael] Pearson [Valeant CEO].’”
Company chiefs should build a competent senior team who can take over day-to-day running, he said. Allergan’s board met more than 34 times over seven months in 2014.
He added companies should be vigilant, “particularly at periods of weakness” over their stock price movement to predict how shareholder groups might behave. “Go and do your homework. […] What would their attack points be and what’s your answer?”
This view was repeated by the President of Pfizer’s Global Innovative Pharma Business, also speaking at Bio 2015. Geno Germano stressed paying attention “to how you’re being viewed by external parties. At Pfizer we try to play the role of the activist periodically, and that has led to some of the decisions we’ve made about capital allocation and spins and sales of assets […].”
Pyott added successful companies must react when a bid causes upheaval with shareholders, reaching out to keep long term-oriented investors on board. “If they’re selling down, it’s game over for you.”
“I was willing with the board to go to the mat on the stockholder special meeting if the circumstances had played out differently,” and require a 51% majority to call the meeting, he said.