07.27.09
$2.9 Billion ($6.3B total)
KEY EXECUTIVES:
Kevin Buehler, President and CEO
Richard J. Croarkin, Sr. VP and CFO
Bill Barton, Sr. VP, International Markets
Sabri Markabi, Sr. VP, Research and Development and Chief
Medical Officer
Ed McGough, Global Manufacturing and Technical Operations
NO. OF EMPLOYEES: 15,000
GLOBAL HEADQUARTERS: Hünenberg, Switzerland
The United Nations has estimated that the global population 65 years of age or older will more than double by 2030. Although the consumption of eye care products spans all demographic categories, the World Health Organization estimates about 75 percent of eye disease is associated with aging. As medical technology expands and the global standard of living continues to rise, people not only will live longer, but they also will require greater access to high-quality medical care. On the basis of such positive demographics, Alcon executives believe global demand for eye care products will remain robust for the foreseeable future.
Alcon’s products fall into three categories—surgical products (mostly medical devices), pharmaceuticals, and consumer products (such as contact lens solutions). Total company sales were $6.3 billion compared to $5.6 billion. Total company net earnings for the year were $2 billion, up from $1.6 billion in 2007. Surgical product revenue—46 percent of total company sales—was $2.9 billion for fiscal 2008, up from $2.5 billion in 2007.
Alcon—a division of Nestlé (based in Vevey, Switzerland)—has derived much of its success through growth of a broad global infrastructure. According to the company, which has its U.S. headquarters in Fort Worth, Texas, the benefits of this global reach were clearly demonstrated in 2008 with international markets contributing more than 55 percent of international sales. International sales grew 19.1 percent to $3.5 billion, led by strong product performance and a favorable foreign exchange environment. While all of the company’s international markets performed well, emerging markets grew 21.5 percent and account for 18.3 percent of global sales.
Company officials said “challenging economic conditions” in the United States had a negative effect on market growth in its pharmaceutical sales, which partially offset solid surgical and consumer sales growth and led to a 5 percent increase in U.S. sales to $2.8 billion. During 2008, Alcon’s surgical product line, which accounts for 46 percent of global sales, expanded its market share leadership in cataract and vitreoretinal surgery and made gains in refractive surgery. Globally, according to the company, more than 60 percent of micro-incision cataract surgeries were performed with Alcon equipment, including the Infiniti phacoemulsification system. During 2008, Alcon launched the Laureate world phaco system for cataract surgery. According to the company, the device is a response to healthcare cost reduction demands and access needs of emerging markets. Alcon also rolled out the Constellation vitreoretinal system to replace its Accurus surgical device, which has been a market leader for almost 10 years. Company officials claim that the Constellation increases the safety and efficiency of the complex surgeries that are performed on the retina and in the back of the eye. In addition, company officials reported making “excellent progress” in the integration of a majority interest in Germany-based WaveLight AG (Alcon completed the purchase of majority control of the company in May this year) and its Allegretto refractive laser for LASIK procedures (though the market for LASIK procedures has declined sharply due to the economy).
Though most of the company’s surgical product line has been built on equipment platforms, the majority of sales come from single-use products, the most important being intraocular lenses (IOLs; an implanted lens in the eye, usually replacing the existing crystalline lens because it has been clouded over by a cataract). Alcon’s AcrySof family of lenses topped $1 billion in sales for the first time in fiscal 2008. The company reported strong sales of intraocular lenses, including the AcrySof ReSTOR and AcrySof Toric intraocular lenses, which correct for presbyopia and astigmatism. Together, sales of these lenses increased 46 percent and accounted for almost 20 percent of IOL dollar sales.
In December, Alcon received U.S. Food and Drug Administration approval of the AcrySof ReSTOR Aspheric, +3.0 add lens, for presbyopia correction. The company claims the new lens significantly improves the range of quality vision for presbyopic cataract patients.
According to Alcon, the company holds the No. 1 market share in cataract and vitreoretinal surgical products and the No. 2 position in refractive surgery.
None of the company’s product breakthroughs would be possible without a well-funded research and development pipeline. A total of 33 percent of the company’s $619 million (up from $564 million in 2007, a 6.9 percent increase) research and development (R&D) expenditure was in the surgical products sector. Pharmaceuticals took the greatest share with 62 percent. The company plans to invest more than $3 billion in R&D in the next five years.
To respond to demand for advances in cataract surgical products, Alcon broke ground on the expansion of its manufacturing center in Huntington, W.Va. The site is the world’s largest intraocular lens manufacturing facility. The new addition is a 74,000-square-foot building that is expected to be operational by 2011.
Though the medical device side of the business has remained strong, the pharmaceutical portion of the company has been the cause of significant corporate machinations. Alcon experienced a significant shareholder change in 2008, with the agreement between global pharmaceutical giant Novartis AG, based in Basel, Switzerland, and the company’s majority owner, Nestlé. The agreement provides for the potential sale of Nestlé’s stake in Alcon to Novartis in a two-step transaction. Under the agreement, Novartis acquired slightly less than 25 percent of Alcon’s shares in July 2008 for $11 billion, and has the option to acquire Nestlé’s remaining 52 percent beginning January 1, 2010, and extending through July 31, 2011.
However, since the deal was announced, Alcon's share price has dropped approximately 25 percent (from about $150 to roughly $112 as of press time).
This leaves Novartis with few options. It can exercise an option to buy Nestlé’s stake for $181 a share. Or Nestlé can exercise its option to sell its stake to Novartis at a premium of 20 percent to the market price—assuming today's prices hold, that would mean Novartis would pay around $136 a share, which is the option Novartis officials would prefer. Both options run for 19 months, starting Jan. 1 next year.
According to industry analysts, Alcon’s shares most likely will recover its year-ago levels, given uncertainties over whether several drugs can keep their patent protection. Two drugs’ patents have been challenged, and a third drug is expected to lose its patent in 2013 or 2014. Those looming patent expirations and the need to replenish Alcon's pipeline were among the reasons why Nestlé decided to sell the business to a drug maker with developmental expertise.
Alcon also recently experienced a management change. In March of this year, Cary Rayment stepped down as chairman, president and CEO, a post he held for nearly five years. Kevin Buehler, a 24-year Alcon veteran, became president and CEO on April 1. Buehler most recently managed the company’s global marketing and sales operations as senior vice president, global markets, and chief marketing officer.
KEY EXECUTIVES:
Kevin Buehler, President and CEO
Richard J. Croarkin, Sr. VP and CFO
Bill Barton, Sr. VP, International Markets
Sabri Markabi, Sr. VP, Research and Development and Chief
Medical Officer
Ed McGough, Global Manufacturing and Technical Operations
NO. OF EMPLOYEES: 15,000
GLOBAL HEADQUARTERS: Hünenberg, Switzerland
The United Nations has estimated that the global population 65 years of age or older will more than double by 2030. Although the consumption of eye care products spans all demographic categories, the World Health Organization estimates about 75 percent of eye disease is associated with aging. As medical technology expands and the global standard of living continues to rise, people not only will live longer, but they also will require greater access to high-quality medical care. On the basis of such positive demographics, Alcon executives believe global demand for eye care products will remain robust for the foreseeable future.
Alcon’s products fall into three categories—surgical products (mostly medical devices), pharmaceuticals, and consumer products (such as contact lens solutions). Total company sales were $6.3 billion compared to $5.6 billion. Total company net earnings for the year were $2 billion, up from $1.6 billion in 2007. Surgical product revenue—46 percent of total company sales—was $2.9 billion for fiscal 2008, up from $2.5 billion in 2007.
Alcon—a division of Nestlé (based in Vevey, Switzerland)—has derived much of its success through growth of a broad global infrastructure. According to the company, which has its U.S. headquarters in Fort Worth, Texas, the benefits of this global reach were clearly demonstrated in 2008 with international markets contributing more than 55 percent of international sales. International sales grew 19.1 percent to $3.5 billion, led by strong product performance and a favorable foreign exchange environment. While all of the company’s international markets performed well, emerging markets grew 21.5 percent and account for 18.3 percent of global sales.
Company officials said “challenging economic conditions” in the United States had a negative effect on market growth in its pharmaceutical sales, which partially offset solid surgical and consumer sales growth and led to a 5 percent increase in U.S. sales to $2.8 billion. During 2008, Alcon’s surgical product line, which accounts for 46 percent of global sales, expanded its market share leadership in cataract and vitreoretinal surgery and made gains in refractive surgery. Globally, according to the company, more than 60 percent of micro-incision cataract surgeries were performed with Alcon equipment, including the Infiniti phacoemulsification system. During 2008, Alcon launched the Laureate world phaco system for cataract surgery. According to the company, the device is a response to healthcare cost reduction demands and access needs of emerging markets. Alcon also rolled out the Constellation vitreoretinal system to replace its Accurus surgical device, which has been a market leader for almost 10 years. Company officials claim that the Constellation increases the safety and efficiency of the complex surgeries that are performed on the retina and in the back of the eye. In addition, company officials reported making “excellent progress” in the integration of a majority interest in Germany-based WaveLight AG (Alcon completed the purchase of majority control of the company in May this year) and its Allegretto refractive laser for LASIK procedures (though the market for LASIK procedures has declined sharply due to the economy).
Though most of the company’s surgical product line has been built on equipment platforms, the majority of sales come from single-use products, the most important being intraocular lenses (IOLs; an implanted lens in the eye, usually replacing the existing crystalline lens because it has been clouded over by a cataract). Alcon’s AcrySof family of lenses topped $1 billion in sales for the first time in fiscal 2008. The company reported strong sales of intraocular lenses, including the AcrySof ReSTOR and AcrySof Toric intraocular lenses, which correct for presbyopia and astigmatism. Together, sales of these lenses increased 46 percent and accounted for almost 20 percent of IOL dollar sales.
In December, Alcon received U.S. Food and Drug Administration approval of the AcrySof ReSTOR Aspheric, +3.0 add lens, for presbyopia correction. The company claims the new lens significantly improves the range of quality vision for presbyopic cataract patients.
According to Alcon, the company holds the No. 1 market share in cataract and vitreoretinal surgical products and the No. 2 position in refractive surgery.
None of the company’s product breakthroughs would be possible without a well-funded research and development pipeline. A total of 33 percent of the company’s $619 million (up from $564 million in 2007, a 6.9 percent increase) research and development (R&D) expenditure was in the surgical products sector. Pharmaceuticals took the greatest share with 62 percent. The company plans to invest more than $3 billion in R&D in the next five years.
To respond to demand for advances in cataract surgical products, Alcon broke ground on the expansion of its manufacturing center in Huntington, W.Va. The site is the world’s largest intraocular lens manufacturing facility. The new addition is a 74,000-square-foot building that is expected to be operational by 2011.
Though the medical device side of the business has remained strong, the pharmaceutical portion of the company has been the cause of significant corporate machinations. Alcon experienced a significant shareholder change in 2008, with the agreement between global pharmaceutical giant Novartis AG, based in Basel, Switzerland, and the company’s majority owner, Nestlé. The agreement provides for the potential sale of Nestlé’s stake in Alcon to Novartis in a two-step transaction. Under the agreement, Novartis acquired slightly less than 25 percent of Alcon’s shares in July 2008 for $11 billion, and has the option to acquire Nestlé’s remaining 52 percent beginning January 1, 2010, and extending through July 31, 2011.
However, since the deal was announced, Alcon's share price has dropped approximately 25 percent (from about $150 to roughly $112 as of press time).
This leaves Novartis with few options. It can exercise an option to buy Nestlé’s stake for $181 a share. Or Nestlé can exercise its option to sell its stake to Novartis at a premium of 20 percent to the market price—assuming today's prices hold, that would mean Novartis would pay around $136 a share, which is the option Novartis officials would prefer. Both options run for 19 months, starting Jan. 1 next year.
According to industry analysts, Alcon’s shares most likely will recover its year-ago levels, given uncertainties over whether several drugs can keep their patent protection. Two drugs’ patents have been challenged, and a third drug is expected to lose its patent in 2013 or 2014. Those looming patent expirations and the need to replenish Alcon's pipeline were among the reasons why Nestlé decided to sell the business to a drug maker with developmental expertise.
Alcon also recently experienced a management change. In March of this year, Cary Rayment stepped down as chairman, president and CEO, a post he held for nearly five years. Kevin Buehler, a 24-year Alcon veteran, became president and CEO on April 1. Buehler most recently managed the company’s global marketing and sales operations as senior vice president, global markets, and chief marketing officer.