A year ago former Schering-Plough CEO Fred Hassan became chairman of Rochester-based Bausch & Lomb, a maker of contact lens products, ophthalmic pharmaceuticals and ophthalmic surgical products. With its manufacturing and marketing operations sliding, the company badly needed a transfusion of new management. Hassan brought one of his star lieutenants, Brent L. Saunders, who served as Schering’s president of global consumer health care, to become chief executive. In 2005, the company faced falling sales and multiple lawsuits as a result of an eye-care product that had caused infections. In October 2007, Bausch went private, acquired by private-equity firm Warburg Pincus.
Both Hassan and Saunders are experienced pharma turnaround executives. Hassan whipped Pharmacia into shape, ultimately selling it to Pfizer. At Schering-Plough he turned Nasonex into a $1 billion product, before selling the company to Merck. Before Schering, Saunders headed PwC’s compliance advisory practice and earlier was its chief risk officer. He managed Schering’s acquisition of Organon Biosciences and headed its consumer-health business. He also oversaw the integration of Schering’s merger with Merck.
As a newly minted CEO, Saunders sees Bausch & Lomb as an iconic brand ready for transformation. The $2.5 billion company is best known for its anti-infective eye drops, disposable contacts and nutritional supplements for the eye. Saunders’ strategy is to find operational efficiencies and boost top-line growth while filling empty pipelines with innovative products. For example, it is developing a system for removing cataracts and replacing them with an innovative intraocular lens.
When he showed up as CEO in March 2010, Saunders didn’t go to the tower building that had served as the company’s headquarters for much of its 158 years, but to the optical center housed in an older factory building elsewhere in Rochester. Four weeks later, when he did turn up to find his executive office at One Bausch & Lomb Place, he said, “You know, guys, this just doesn’t work. The them vs. us, suits vs. workers mentality is unacceptable.” He put the tower up for sale and moved 200 executives and the legal and administrative staff to the center where everybody else worked.
A year later Saunders has changed the business model, beginning with inverting the classic management pyramid “One thing I learned from Fred [Hassan] is that the front-line managers are the most important people in the company. I’m the least important. It’s our job to make their job easier.”
When the company launched Apple’s iPads internally, the sales reps got them first; 700 managers were eliminated, reducing the head count to 11,000. The number of layers shrank from 11 to seven, while the span of control of direct reports has gone from three to five-and-a-half. Plants in Scotland were eliminated and others in Ireland and Rochester were consolidated. What was once called R&D has been renamed D&R, to emphasize the importance internally of bringing research to deliverable products.
B&L remains the only stand-alone eye health company. Research spending as a percent of sales is now in the high single digits–almost as high as Merck’s. The company had developed a strong reputation for first-class ocular science, but like nearby Xerox Parc in the 1980s, allowed others to bring their ideas to market.
Next, Saunders expects to push aggressively in markets around the world. Already two-thirds of its revenues come from outside the U.S. While it entered China in 1982 and retains a strong brand there—in many parts of China a contact lens is known as a “Bausch”—he feels that the company has ground to make up.
As a newly minted CEO walking into a company that was somewhat removed from your sector, what was the biggest challenge you had to face?
Because it’s a healthcare and a consumer-product company, its lifeline depends on innovation and product flow. The thing that was missing when I got there—and it was worse than I initially thought—was that the cupboards were bare on innovation. This was astonishing, considering we have some wonderful scientists throughout the company. We got them together and said we’re going to build a pipeline. Let’s go through old projects that were discarded. Let’s go through the landscape technologies that are available to us from licensing and outside sources, and rebuild a pipeline. I’m happy to say we have now three separate businesses: surgical, pharmaceutical and, what most people know us for, our consumer eye business of contact lenses and solutions, which remains the biggest, but pharmaceuticals is catching up rapidly. We now have a pipeline in each of the three businesses, and we have at least one transformational innovation project in each pipeline, in each business, which is a very exciting change.
What new things are coming along in the pipelines?
When you look at our three businesses, you will see revolutionary change. In our surgical business, we compete against an 800-pound gorilla in the market called Alcon. So we need to do things differently. We’re not going to out-Alcon Alcon; we’re not going to beat them at the same game. So we are developing disruptive technologies and ways of providing better solutions for surgeons for their patients. For example, over the course of the next 18 to 24 months, we hope to change the way some particular eye procedures or surgeries are delivered to the patients.
In addition to that, we are a cataract company and specialize in intraocular lenses for cataract surgery, the replacement lens after you remove the cataract. We have a wonderful new material that we found in Japan with a company called Stanton and for which we got worldwide rights. We’re putting great optical designs on this new material, and launching it this year in Europe, and introducing it in the US next year.
Lastly, we have a product called Crystalens in the U.S., a very good premium IOL, intraocular lens. We are developing a permanent lens for people with astigmatism.
When you get cataracts, your lens gets very cloudy. So the surgeon will cut in your eye, pull out the old lens, and insert a permanent lens back in your eye. Ours is what’s called an accommodating IOL, which means it gives you more natural sight, so you should be able to see far and near.
The new Stellaris vitreoretinal surgical system
debuted in August of 2010.
In our pharmaceutical business, we’re developing a new class of drugs to treat post-op inflammation, dry eye and allergies. This is a huge, unmet medical need and we’re excited that this category is now in phase three now.
Finally, in our vision-care business, we launched a new solution this year called Biotrue, the first new entry into the category in five years. It’s doing quite well. It can be worn a long time without getting dry eye. We’re also developing innovative breakthrough designs, different ways of thinking about how to design the optic system on a contact lens involving new materials. The combination of new materials and new solutions becomesgame-changing.
Before you arrived, Bausch & Lomb suffered a product recall five years ago that gave the company a black eye, so to speak. Like Merck with its Vioxx, one misstep cancels many other good things that may have been done.
It can take 158 years to build a wonderful brand and this can be destroyed in one week if you’re not a good steward of the brand. The MoistureLoc situation, which happened over five years ago, certainly hurt our brand. But at the end of the day, it’s also something to learn from. I’ve been through this at Schering, where we had FDA problems and worked hard to earn trust with consumers, patients and with the FDA and other regulators. For Bausch & Lomb, MoistureLoc represents the same type of opportunity. We’re investing heavily in improving our quality systems of our manufacturing processes and building a better supply chain. We’re working very hard now to build trust with our key regulators. But we’re confident this is behind us.
What will Bausch & Lomb become in five years?
I’m hoping in five years you’ll think of us as the most innovative company you know. It starts with first class customer service and finding solutions to a lot of the unmet medical needs in the eye-health space. From a management perspective, we need to create an environment where people feel they are empowered to think about these things as opposed to the politics of bureaucracy. We kept the vast majority of the people here because one of the very early advantages the company has is the strength of its people, and their commitment to improving eye health.
What were they lacking before you arrived?
It was leadership and focus. It was a company that had become very inward in its thinking, and I think it believed it was there to serve itself. What I found was a lot of people who were instantly on board with the vision that I outlined, which is that we’re here to service customers and patients and bring our innovations to the market. As simple as that sounds, it was something that just hadn’t been happening for years. The company probably started losing its way 15 or 20 years ago. And that seems to be a bit of an epidemic in Rochester. Xerox had the PC and Kodak had the digital camera and Bausch & Lomb founded the eye health industry. All three, from what I know, got a little insular at some point. It needed fresh thinking to rediscover its true mission.