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Phoni CEO Braces For Changes

Posted by: Gabriella Upwoodly-Mobyle on July 14

Phoni’s CEO Johnny B. Sinister stopped by BusinessWeak for a free lunch yesterday. Before firing a line of reporters and editors, he tackled some tough questions on the company’s pending mega-merger with Whyus, the potential for health care reform, and other pressing issues facing his industry. Here are edited excerpts from our conversation:

Q: What are the biggest challenges Phoni is facing today?

A: The biopharmaceutical industry in general is experiencing very significant change. We’ve gone from an industry led by scientists to an industry led by lawyers and accountants, and as a result, R&D is now anathema to us. It involves an element of risk and creativity that we CEOs simply don’t like, and so we prefer to buy our ideas in or take over generics. That’s particularly a challenge in light of drugs going off patent. In our case, we have a medicine that’s helped us make more money than any medicine in the world—Lucrative—which will be losing its exclusivity at the end of 2011. Ours was a business that put a great deal of emphasis on high margin treatments for lifestyle conditions in the developed world and the U.S. in particular. That’s why we were successful with big drugs like Lucrative. But we wouldn’t be CEOs if we didn’t feel the need to make random changes. So we’ve stuck with the old stand-by of hostile takeovers as shown by our acquisition of Whyus, just to make sure we stay bigger than the competition in the short term, given that the short term is all us executives and our shareholders care about. Primary care, specialty care, oncology, animal health, consumer health – we’ll sell it all off and shut it down once we’ve asset stripped anything of any value.

Q: The Whyus acquisition brought you back into the field of consumer products, just a few years after Phoni sold its consumer business to Thomson & Thomson. Do you think that sale was a mistake?

A: Never admit a mistake and never apologize, that’s a CEO’s philosophy, especially when we are never held accountable for the consequences of our random decisions. I don’t look back at decisions when they are as embarrassing as that one. T&T are still laughing all the way to the bank. But as our consumer healthcare division was the only part of our business that was actually growing, it was clearly incompatible with the rest of our portfolio, so it had to go. But I’m looking ahead, and I’m very excited about where I am today. Three years away from a massive retirement package, to be exact.

Q: The conventional wisdom was that big mergers hamper innovation. What do you think?

A: Who cares about innovation when you have a huge wad of cash to buy in the products you need to keep making you money? Our prior big mergers brought us Lucrative, they brought us Morontin, , they brought us Grababux, they brought us Stuntent, they brought us Exuberant (oops, you won’t mention that last one will you?) – all were billion dollar compounds that didn’t cost us a dime in R&D. So these were valuable transactions that paid for themselves in a couple of years. Except for Exuberant, which cost us two billion dollars and made us nothing, so we won’t talk about that. They also brought us people, they brought us talent, they brought us science, but fortunately we soon able to off-load such unwanted baggage. The Whyus deal is different because it is not about a particular product – it really is just a random act of management that just happens to fit our pattern of slash and burn acquisitions. That’s far easier and less risky than doing your own R&D.

Q: What’s your impression of the health care reform efforts in Washington?

A: It’s a lot of pinko-liberal posturing that will soon evaporate when we start pushing the big dollars at the right people in the new administration. We’re way too rich and powerful to allow anyone to endanger the lucrative status-quo that has evolved for everyone’s benefit. Except the patient’s of course, but who cares about losers like them?

Q: What’s your view of the debate about generic biotech drugs?

A: We feel very strongly that in order to preserve the ability to innovate for biologics, which provide tremendous promise for addressing tough diseases like cancer and rheumatoid arthritis, we have to provide innovators with enormous incentives. These are drugs that are extremely risky and costly and challenging to make. So we won’t be bothering. We’ll just carry on with hostile take-overs of smaller companies the minute they look like coming up with anything that will make money.

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