Zoetis CEO Juan Ramón Alaix speaks about leading an animal health company to a $2.2 billion IPO and facing down an aggressive activist
Few CEOs experience the pressure of spinning off a business and taking it public. Rarer still is the chief executive who has successfully handled one of the world’s most aggressive activist investors. Juan Ramón Alaix has done both – all within his first five years as CEO of Zoetis (zo-EH-tis), the world’s largest animal health company. Today, Zoetis operates across 100 countries and has a market cap of more than $35 billion. It boasts more than 300 product lines, ranging from vaccines to medicated feed additives, and generates nearly $5 billion in annual revenue.
Alaix became CEO in 2012, after Pfizer CEO Ian Read announced the pharmaceutical giant would seek strategic options for its animal health division, a process that ultimately led Pfizer to spin the division off as its own business: Zoetis. In 2013, Zoetis had one of the year’s largest initial public offerings, surpassing both Twitter’s and Hilton’s IPOs.
The IPO put Zoetis, essentially overnight, on the radar of hundreds of analysts and investors – many of whom knew little about the multibillion-dollar business, and the nuances of the animal health industry. One of those interested investors would turn out to be the vocal activist Bill Ackman.
From Zoetis’ headquarters in Parsippany, New Jersey, Alaix told Brunswick how intense training and clear communication were crucial in the build-up to Zoetis’ public offering. And for the first time, Alaix shared the story of what happened after he received a call from Ackman, and why the company believed open discourse, not a public battle, was the right option.
Did you think you were ready to become CEO?
You only have the experience to be a CEO when you’ve already been a CEO. Of course, if companies only hired CEOs to be CEOs, you’d quickly run out of talent. I’d been running Pfizer’s animal health business successfully for more than six years, and reported to Ian [Read, CEO of Pfizer] for years, so it was an educated bet.
How did you prepare for it?
I was fortunate to have access to a number of current and former CEOs who’d taken a company public. This group included leaders who had failed, and they provided some of the most valuable advice. I was also fortunate to participate in the board recruitment process, meeting and interviewing potential board members. This was a rare opportunity, which helped ease my transition into the role of CEO.
And even before the spinoff, we started acting like a company within a company. We identified who would be running the company, my leadership team. We also had to identify the new structures we needed to build as a standalone company. We did all of this while communicating with our newly formed internal board, just like any company.
You became the face of this new company. How did you feel about that part of the job?
I had to adjust the way I discussed the elements of our business. I was now communicating with individuals who were very familiar with Pfizer, the larger company of which we’d been a part, and the human pharmaceuticals business, but they were less knowledgeable about our animal health business. I needed to take a step back and ensure they understood the fundamental elements of Zoetis’ business.
What audiences are we talking about? Media? Investors?
It’s both. In many cases, you assume that the people in front of you have similar knowledge about your business – like internal audiences do – but that’s a mistake. And this took me time to learn.
We were talking to investors who didn’t appreciate the advantages of animal health, such as our shorter innovation cycle and the lack of third-party payers. These are key differences.
Did this new approach to communications cause some human health-focused analysts to give animal health a second look?
Absolutely. Because we took a step back and did a better job explaining our fundamentals, many Pfizer shareholders saw for the first time the opportunities our business presented.