Bausch & Lomb is perhaps best known for its contact lenses and lens care products, but as a diversified eye healthcare company, ophthalmic surgical and pharmaceutical products are an equally important part of its business.
With more than 13,000 employees across 36 countries, the company is teetering on the edge of the big league of pharma, with rivals in the international market including Johnson & Johnson, Alcon, Allergan, MSD-Chibret and CIBA Vision (Novartis), Merck, Pfizer and Santen.
The company’s pharmaceuticals business, which represents more than one-third of its revenue, includes generic and branded prescription ophthalmic drugs, ocular vitamins and over-the-counter (OTC) medications. The products are distributed through wholesalers, independent pharmacies, drug stores, food stores, mass merchandisers and hospitals.
In 2008, Flemming Ornskov was appointed global president of Bausch & Lomb’s pharmaceutical division with the aim of globalising it. His previous experience as president of Novartis’s ophthalmic business qualified him for the post. In recent years, Novartis has been one of the first pharmaceutical giants to recognise the benefits of globalisation.
Mr Ornskov’s first task was to re-locate the pharmaceutical division’s headquarters to Madison, New Jersey, from the group’s headquarters in Rochester, New York.
“We looked at OTC and generic business challenges and came to the conclusion that New Jersey was the best site for access to talent,” says Mr Ornskov. The move paid off when a number of competitors cut staff, increasing the talent pool available. But it is the division’s global structure that has most dramatically changed since Mr Ornskov took charge, with the introduction of four strong regional clusters.
North America is run out of the Madison, New Jersey, office with a small commercial operation in Canada; the European operation is centralised in Zuc, Switzerland; Latin America is run out of Florida, where the company also has its North American manufacturing site; and Asia-Pacific is run out of Hong Kong, because China is the company’s biggest Asian market.
Mr Ornskov has appointed regional directors to expand the company’s presence in key growth markets. Part of their task is to maintain company cohesion. “We used to be incredibly fragmented in terms of brands, but I’ve created Bausch & Lomb global branding instead of simply being an umbrella brand,” he says.
His global branding strategy has created a direct commercial presence in about 20 countries and indirect presence in emerging markets via partnerships and distributors.
Mr Ornskov has a similarly global outlook on R&D. The company has a central R&D facility in New York but has also developed what Mr Ornskov calls “adaptive” R&D to support activities in each market; these centres are in Germany, France and China.
All R&D locations – except for the global R&D centre in Rochester – were selected for their proximity to the company’s four manufacturing sites: in Tampa, Florida, central France, Berlin and China.
“The work we are doing in the adaptive R&D centres includes upgrading formulations, lifecycle management and testing, so when we have upgraded a formulation or changed a dosage we can test it immediately on a small scale and run the manufacturing batch on site,” says Mr Ornskov.
The company was taken off the stock exchange in 2007 when private equity firm Warburg Pincus acquired it, but turnover for 2006 was estimated to be $2.29bn. The private equity owner is following an aggressive path of global expansion. Currently 50% of sales originate from Europe, the Middle East and Asia, and about 40% from North America. “Even though eastern Europe, Asia and Latin America are our current growth drivers, they represent only 10% to 15% of our business now but we hope to at least double that,” he says.
The business has grown historically by acquiring other companies – in Germany, it bought Dr Mann; in France, a company called Chemin; and in China it owns 70% of local company Freda.
“In the OTC market in China we are the market leader and still rapidly growing,” says Mr Ornskov. Current expansions include establishing a dedicated sales organisation in South Korea instead of going through distributors, evaluating Taiwan, and trying to expand the small presence the company has in Australia and New Zealand.
But the growth market on Mr Ornskov’s wish list is Japan. “I’m currently in Japan working with a team on an investment case for putting significant resources into Japan because it is the world’s second largest ophthalmic pharmaceutical market and more and more of our growth should be coming from that region,” he says.
Another region showing growth is eastern Europe. Until now, the company has been working through distributors, but Mr Ornskov plans to set up a company in Russia in the near future. “It’s a great growth market for us and the business environment is maturing,” he says. The company has been using Berlin as a platform to expand into central and eastern Europe, including Russia, and is seeing good growth across the whole of eastern Europe.
“The dynamic markets are eastern Europe, Asia-Pacific and Latin America – we did not have much presence in Latin America but Brazil, Mexico and Argentina are very attractive and sophisticated markets,” says Mr Ornskov.
As big pharma diversifies its business models towards generic and OTC products, Mr Ornskov says there are benefits in collaboration with other companies. Most recently, Bausch & Lomb launched a new brand of antibiotics and struck a major joint venture with Pfizer in the US to share sales forces.
“A smart way to go is to leverage cost infrastructure and expertise,” he says. “The same model can work in the research pipeline, where coming up with drugs is costly. If you can work with several parties in collaboration, you can leverage your risk and everyone can keep their costs at a reasonable level.”
To be a diversified smallish company in the big pharma world is a good place to be. “The future is not acquisitions for us but more joint ventures,” says Mr Ornskov.
Bausch & Lomb (pharmaceutical)
Madison, New Jersey, USEmployees worldwide
More than 100 countriesOwnership