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He Bet on Botox -- And Won


Allergan (AGN) Inc. CEO David E.I. Pyott does not need an injection of his company's wrinkle-erasing drug, Botox. At 50, he is blessed with a nearly unlined face. Nevertheless, Pyott happily underwent a Botox treatment last year at a session for Allergan distributors in Monaco. "I wanted to demonstrate I had no fear [of the drug]," says Pyott; after all, Botox is derived from the same paralyzing toxin that causes botulism. "And I want everyone here to feel good about the fact that I'm in touch with the details of what we do."

Thanks to Pyott's hands-on management, and to the small wonder that is Botox, a lot of people are feeling good about Allergan these days. And looking good, for that matter. From the moment he took the helm in 1998, Pyott had grand ambitions for a company then known only for its eye-care products: He wanted Allergan to be a cutting-edge pharmaceutical leader. Little did he know that Botox, all but ignored by his predecessor, would not only help transform the company but also become a cultural phenomenon.

Allergan originally purchased Botox in 1991 from an ophthalmologist who was developing it to treat rare muscular disorders such as uncontrollable eye-blinking. Doctors who prescribed Botox had reported its surprising power to erase wrinkles, and dermatologists were using it under the table on some eager patients. But Allergan was spending virtually nothing to develop the drug for cosmetic use. "This eye-care company fell into an opportunity with its eyes closed," jokes Pyott, a 21-year veteran of Sandoz, now part of Novartis (NVS). It was he who figured it was time to put some money behind Botox to see what it could do. So he cut overhead costs by one-third, cast off slow-growing products such as contact-lens solution (much to the consternation of some execs), and in 1999 boosted spending on research and development 38%, to $135 million -- much of it devoted to the fledgling product.

THE EYES DON'T HAVE IT. Pyott's decision paid off in 2002, when Allergan, based in Irvine, Calif., won Food & Drug Administration approval to market Botox as a wrinkle reducer. The drug's sales jumped from $309 million to $440 million that year and are expected to reach $540 million this year, which means Botox would account for one-third of Allergan's $1.7 billion in estimated total revenue. The company's profits are expected to increase 24%, to $305 million, this year, and investors have pushed the stock up 35%, to 79, since January.

Botox, of course, has became a sensation -- especially in Hollywood, where gossip columnists say that even Arnold Schwarzenegger has gone under the needle. The word "Botox" was recently added to the Oxford English Dictionary. Pyott is staggered by the product's success. The CEO, with his understated British humor, has one word for Wall Street analysts who said Botox would never amount to more than a niche drug: "Oops."

Pyott believes Botox can do more than just take a few years off your face. Allergan is testing Botox as a remedy for a host of diseases, including migraines, overactive bladder, chronic back pain, and excessive sweating. Many physicians agree that the ability of Botox to block nerve activity in the areas where it is injected could someday make it a cure-all. "It will become the wonder drug of the century," says Andrew Blitzer, professor of clinical otolaryngology at Columbia University's College of Physicians & Surgeons. But already the federal government is concerned that Allergan may be pushing Botox a bit too hard. On June 23, the FDA warned Allergan that its print ads made overly broad claims about the drug's ability to reduce wrinkles and downplayed potential side effects, which include droopy eyelids, nausea, and respiratory infections. Pyott says Allergan didn't intend to break any rules and is talking with the FDA about how to respond to the complaint.

This is not the first time Pyott has faced controversy at Allergan. You can't expect a 53-year-old company to rethink its business without some initial discomfort. For Pyott, that moment came in January, 2002, when he decided to spin off the unit that makes contact-lens products and medical devices. It was not a decision he took lightly: The division accounted for one-third of sales. The problem was that it wasn't growing more than 2% a year. "It felt as if he was chopping off our right arm," says Allergan co-founder and former CEO Gavin S. Herbert, now on the board. Pyott felt the business was a drag on the company's other, more promising, side: drug development. "We were like a catamaran with two outboards -- one going two knots and the other 20," Pyott says. "Imagine the circling effect."

Pyott has never shied away from change. At Sandoz, he worked his way up through the nutritional division in Barcelona, Vienna, and Kuala Lumpur before moving to Minneapolis to take on his toughest task: revamping a struggling unit that distributed dietary products to hospitals. He promptly named himself acting manager and expanded the sales force. Within five years, Sandoz' market share tripled. Pyott's lack of pharmaceutical experience made him an odd choice for Allergan, but his take-charge style captivated the board. "Inside this very quiet guy is a strategic thinker with tremendous drive," says Leonard Schaeffer, CEO of WellPoint Health Networks and an Allergan board member.

The CEO, who speaks four languages and has lived in 10 countries, inherited his wanderlust from his parents. When he was 3, his family left England for India, where his father managed a sugar plantation. Four years later, they moved to Scotland. During his college years, Pyott roamed from Germany to the Netherlands and then back to England, collecting degrees in business and law, while climbing mountains in his spare time.

These days, Pyott continues to work out his master plan to keep Allergan sitting pretty. In addition to pouring the Botox profits into uncovering new uses for the drug, Allergan is researching potential treatments for glaucoma, psoriasis, acne, and diabetes. Pyott's goal is to keep the company growing without veering too far from what Allergan knows best. "I'm a destroyer captain, not a battleship captain," he says. "Battleships are big and very slow. We're small, but we survive." Indeed, Pyott's deft handling of Botox may continue to help this decades-old company retain its youthful vigor. By Arlene Weintraub in Irvine, Calif.


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