Under Pfizer's gaze, Allergan's Saunders softens his tone on early-stage R&D

Allergan CEO Brent Saunders

Allergan ($AGN) CEO Brent Saunders, who once called Big Pharma's perceived need for drug discovery "a fallacy," has come around on early-stage research, a change in tone that happens to coincide with Pfizer's ($PFE) stated interest in buying his company.

Back in January, as Saunders' Actavis prepared to take on the name Allergan after a $66 billion merger, the CEO told Forbes "the idea that to play in the big leagues you have to do drug discovery is really a fallacy. You have to do research. You have to be committed to innovation. I strongly believe that. But discovery has not returned its cost of capital."

But speaking to Reuters from an Allergan discovery lab this week, Saunders said he has instituted "a very open-minded management structure," learning "new things all the time that change my opinion." Before the Allergan merger, Actavis had no drug-discovery operation, owing to Saunders' long-stated aversion to the discipline, "but we assessed Allergan's discovery capabilities in ophthalmology and aesthetic medicine and recognize they added a lot of value," Saunders said. "Not only have we kept them; we've invested in them."

That recognition comes as Allergan touts a pipeline of more than 70 mid- to late-stage therapies and talks up its plans to spend about $1.7 billion on R&D in 2015. The company went on the offensive this week in part to distance itself from companies like the controversial Valeant Pharmaceuticals ($VRX), whose growth is almost entirely dependent on acquiring assets versus developing them in-house.

But hanging over all of Allergan's pronouncements is Pfizer, which approached the drugmaker about a merger last month and remains in "friendly discussions" with its target, the companies have said.

Neither side is commenting on the possibility of a deal, but Saunders' change of heart on drug discovery has stirred speculation about his broader intent. On the one hand, he could be better positioning himself to take the top spot at a future Pfizer-Allergan conglomerate, talking up the importance of innovation within earshot of a company that still spends billions on risky R&D each year and hoping current CEO Ian Read might step aside and put him in charge. Or it could be M&A gamesmanship, as, "friendly" or not, Pfizer and Allergan will eventually have to settle on a price for any buyout to go through, and the latter company's recent bluster about its pipeline could be a gambit to increase its perceived value.

- read the story

Suggested Articles

Fifteen of the 22 patients in a gene therapy trial no longer needed transfusions, while the remainder needed fewer transfusions.

Argos Therapeutics is ending its kidney cancer trial and mulling options, including a merger or sale, to stay alive.

CNS Pharma says berubicin is the first anthracycline drug to cross the blood-brain barrier and could transform treatment of the highly invasive brain tumor.