07.26.18
$6 Billion
KEY EXECUTIVES:
Vasant Narasimhan, M.D., CEO, Novartis
Harry Kirsch, CFO, Novartis
F. Michael Ball, CEO, Alcon
David Murray, CFO, Alcon
David Endicott, COO, Alcon
Michael Onuscheck, President and General Manager, Global Surgical Franchise, Alcon
Andy Pawson, President and General Manager, Global Vision Care Franchise, Alcon
NO. OF EMPLOYEES: 126,000 (total)
GLOBAL HEADQUARTERS: Fort Worth, Texas
(Basel, Switzerland)
It’s no secret that Alcon has been a prospective candidate for Novartis’ chopping block for the past few years. The struggling eye care business has fallen prey to diminished sales for cataract and refractive equipment over recent years, as well as competitive pressures in the intraocular lens (IOL) market.
Novartis Chairman Jeorg Reinhardt’s comments to Reuters regarding its underperformance in 2016 were particularly provocative. “Alcon has not developed over the past two years as we had expected,” he said. “Even though Novartis would continue to push the turnaround, all options were open in the future. In the long run, the question arises as to whether we are the best owner for Alcon.”
At the start of the company’s 2017 fiscal year—ended Dec. 31—then-CEO Joe Jimenez told CNBC that Novartis intended to initiate a strategic review of the flagging eye care business.
“We are going to look at what’s in the best interest of our shareholders, in terms of the future of that business, ranging all the way from retaining the business to a capital markets exit through an IPO or a spin,” he explained. “We’re going to take 2017 to do that and we will be back with an update on that by the end of this year.”
However, the measures taken to fortify Alcon—for example, instituting CEO F. Michael Ball and moving its ophthalmic drugs portfolio to Novartis’ main pharmaceuticals division to focus on devices—began to show signs of paying off after the third quarter of fiscal 2017. The quarterly profit increase was Alcon’s first in almost three years. As a result, late last October, Novartis decided to give the ailing division another year and a half to get its act together. According to Bloomberg, a decision regarding Alcon’s future probably won’t come before the first half of 2019.
As Jimenez was preparing to hand the reins to Vasant Narasimhan after eight years of leading the company around that time, he told Bloomberg he expects the company to return to growth in 2018. Alcon needs to demonstrate sales and margin improvements before a decision can be reached.
“We’d want to come to the market from a position of strength,” Jimenez told reporters on a conference call. “Let’s get this thing humming with good momentum, and then a final decision will be made.”
It did indeed gain speed, a bit earlier than Jimenez portended. The Texas-based maker of precision eye surgery equipment, advanced contact lenses, and lens care solutions posted $6 billion in 2017 revenue, a welcome 4 percent increase that undoubtedly had Alcon executives breathing sighs of relief.
It was perhaps this return to profitability that prompted Novartis to formally announce Alcon’s spinoff in early July of this year. The eye care division will become a separately traded, standalone company. Novartis will initiate a share buyback of up to $5 billion to be executed by the end of 2019. This action is planned to be largely funded through the proceeds of the divestment to GSK of the consumer health joint venture stake, net of the AveXis acquisition payments.
“Our strategic review examined all options for Alcon ranging from retention, sale, IPO to spinoff,” Novartis Chairman Reinhardt commented when the spinoff was announced. “The review concluded that a spinoff would be in the best interests of Novartis shareholders and the Board of Directors intends to seek shareholder approval for a spinoff at the 2019 AGM. This transaction would allow our shareholders to benefit from potential future successes of a more focused Novartis and a standalone Alcon, which would become a publicly traded global medtech leader based here in Switzerland.”
Alcon’s Surgical franchise, which had been the main financial problem for the company in recent years, achieved 5 percent sales growth to post $3.7 billion in 2017 proceeds. This was primarily stimulated by double digit sales growth in vitreoretinal products and moderate revenue boosts in both cataract disposable surgical supplies and IOLs for cataract surgery.
Alcon’s Surgical franchise began its year by launching last January the AcrySof IQ PanOptix Toric presbyopia- and astigmatism-correcting IOL for patients with pre-existing corneal astigmatism undergoing cataract surgery. Having achieved CE mark certification November 2016, the lens provides a new option for astigmatic patients to address near, intermediate, and distance vision needs. It expands the PanOptix trifocal platform first launched in September 2015, utilizing the same trifocal optic as the AcrySof IQ PanOptix IOL on the front surface of the lens and the astigmatic correction features of a toric IOL on the back surface. At the time of launch, it was also the only IOL on the market with a 60 cm intermediate focal point, a preferred distance for many patients.
In March, the AcrySof IQ ReSTOR +2.5 Multifocal Toric IOL with ActiveFocus design obtained FDA approval for uncompromised distance vision and presbyopia correction. Previously, presbyopia-corrective IOL designs tended to compromise on distance vision to ensure a range of vision. The only multifocal toric IOL in which the central portion is 100 percent dedicated to distance vision, the ActiveFocus toric IOL provides clear distance vision and a range of vision to address astigmatism and presbyopia at the same time. The launch extended the AcrySof IQ platform to a broader population of nearly 2 million cataract patients with treatable astigmatism who undergo cataract surgery each year.
In July, U.S. reimbursement became effective for the CyPass Micro-Stent, a minimally invasive glaucoma surgical (MIGS) device that treats adult patients with mild to moderate primary open-angle glaucoma in conjunction with cataract surgery that Alcon launched in October 2016. Further, CyPass also gained positive feedback related to coverage and payment from all U.S. Medicare Administrative Contractors (MACs) and several major commercial payers. Positive feedback from the MACs means Medicare will cover CyPass in all 50 states, and the micro-stent is now included in leading national commercial payers’ plans.
Alcon also made efforts to bolster its customer training and technical service operations last September. The company formed the Clinical and Technical Services operation, which is charged with installing, maintaining, and training customers on technologies across cataract, refractive, and vitreoretinal surgery. Alcon had previously crippled customer loyalty somewhat by cutting spending on surgeon training in 2016 in order to compensate for falling sales. According to the company, the efforts to restore these services were well received.
In October, Alcon’s Clareon IOL with the AutonoMe preloaded delivery system gained EU approval. Featuring an automated CO2-powered mechanism and ergonomic design, the first-of-its-kind disposable IOL delivery system permits precise, single-handed IOL placement into the capsular bag in cataract surgery patients. The Clareon hydrophobic acrylic IOL loaded into AutonoMe had previously gained CE mark approval four months prior, and is made of an optic polymer biomaterial that allows for improved clarity for cataract patients.
Sales for the Vision Care franchise swelled a modest 3 percent to $2.1 billion in 2017. Contact lens revenues, resting on the back of continued double-digit growth of water-gradient lens Dailies Total 1, rose 4 percent from the previous year. Contact lens care products were in line with the prior year.
In March, Alcon launched Air Optix Choice, a program that equips patients with the latest technology in monthly contact lenses and an easy-to-remember replacement schedule. The firm simultaneously extended its Dailies Choice Program, which expands patient access to Dailies contact lenses by reducing their price to that of two-week replacement lenses. Last May, the business launched U.S.-specific packaging for Dailies AquaComfort Plus (DACP) spherical contact lenses in 90-, 30-, and 5-packs to assist patients with proper lens care and wear. The DACP box’s new design features patient-friendly educational elements like detailed lens insertion and removal illustrations, a toll-free helpline and email address, and Dailies website access for at-home and online support. The DACP change is the first of several planned packaging changes.
In November, the Novartis division invested $97 million to expand its Johns Creek, Ga., operations center. It is the first phase of a multi-year project to boost production capacity for Dailies Total 1 contact lenses. In 2015, Georgia Gov. Nathan Deal proclaimed that Alcon had created 550 jobs and invested $500 million in the Johns Creek facility since 2013.
“Alcon’s expansion in Johns Creek reflects Georgia’s commitment to providing industry leaders with the best resources to compete worldwide,” Deal said in a news release last November. “Alcon already has a significant economic footprint in the Johns Creek area and with this expansion, the company is deepening its investment in our top-ranked business climate. With the next phase of this project, Alcon will create even more high-tech jobs for Georgians using our cutting-edge technological capabilities as a foundation for future innovation in eye care. We are proud of Alcon’s success and appreciate the company’s commitment to creating jobs and investing in the Johns Creek community.”
As part of the firm’s strategic review, Novartis also decided to move over-the-counter and diagnostic ophthalmic products from the Innovative Medicines division to Alcon, which became effective Jan. 1 of this year.
Under New Management
Last September, Novartis CEO Joe Jimenez announced he would step down from the position after eight years of leading the company. Jimenez began his tenure leading Novartis’ Consumer Health division, advanced to the position of division head of Novartis Pharmaceuticals, taking the reins of the company in 2010. Effective Feb. 1 of this year, former global head of drug development and chief medical officer Vasant Narasimhan, M.D., was installed as CEO.
“Both from a professional and a personal perspective, this is the right moment to hand the leadership reins of the company to Vas,” Jimenez said in a company statement. “Our strong pipeline and the strategic moves we have taken to focus the company have put Novartis on a strong path for the future. On the personal side, after 10 wonderful years in Switzerland, my family is ready to return to Silicon Valley and the U.S. I’m confident that Vas will be an excellent successor.”
Dr. Narasimhan joined Novartis in 2005, having previously worked at global management consulting firm McKinsey & Company. An elected member of the U.S. National Academy of Medicine, he held numerous leadership positions across Novartis in commercial, drug development and strategy roles. Prior to his role as head of drug development and chief medical officer, he served as head of development for Novartis Pharmaceuticals.
“I would like to congratulate Joe and express my gratitude to Joe, Joerg, and the Board of Directors,” Dr. Narasimhan said. “I feel honored and humbled to be asked to lead Novartis. We will continue our legacy of bringing leading innovation to patients around the world. With our recent launches, our strong pipeline, broad capabilities, leadership team, and committed people, I am very confident about our future.”
KEY EXECUTIVES:
Vasant Narasimhan, M.D., CEO, Novartis
Harry Kirsch, CFO, Novartis
F. Michael Ball, CEO, Alcon
David Murray, CFO, Alcon
David Endicott, COO, Alcon
Michael Onuscheck, President and General Manager, Global Surgical Franchise, Alcon
Andy Pawson, President and General Manager, Global Vision Care Franchise, Alcon
NO. OF EMPLOYEES: 126,000 (total)
GLOBAL HEADQUARTERS: Fort Worth, Texas
(Basel, Switzerland)
It’s no secret that Alcon has been a prospective candidate for Novartis’ chopping block for the past few years. The struggling eye care business has fallen prey to diminished sales for cataract and refractive equipment over recent years, as well as competitive pressures in the intraocular lens (IOL) market.
Novartis Chairman Jeorg Reinhardt’s comments to Reuters regarding its underperformance in 2016 were particularly provocative. “Alcon has not developed over the past two years as we had expected,” he said. “Even though Novartis would continue to push the turnaround, all options were open in the future. In the long run, the question arises as to whether we are the best owner for Alcon.”
At the start of the company’s 2017 fiscal year—ended Dec. 31—then-CEO Joe Jimenez told CNBC that Novartis intended to initiate a strategic review of the flagging eye care business.
“We are going to look at what’s in the best interest of our shareholders, in terms of the future of that business, ranging all the way from retaining the business to a capital markets exit through an IPO or a spin,” he explained. “We’re going to take 2017 to do that and we will be back with an update on that by the end of this year.”
However, the measures taken to fortify Alcon—for example, instituting CEO F. Michael Ball and moving its ophthalmic drugs portfolio to Novartis’ main pharmaceuticals division to focus on devices—began to show signs of paying off after the third quarter of fiscal 2017. The quarterly profit increase was Alcon’s first in almost three years. As a result, late last October, Novartis decided to give the ailing division another year and a half to get its act together. According to Bloomberg, a decision regarding Alcon’s future probably won’t come before the first half of 2019.
As Jimenez was preparing to hand the reins to Vasant Narasimhan after eight years of leading the company around that time, he told Bloomberg he expects the company to return to growth in 2018. Alcon needs to demonstrate sales and margin improvements before a decision can be reached.
“We’d want to come to the market from a position of strength,” Jimenez told reporters on a conference call. “Let’s get this thing humming with good momentum, and then a final decision will be made.”
It did indeed gain speed, a bit earlier than Jimenez portended. The Texas-based maker of precision eye surgery equipment, advanced contact lenses, and lens care solutions posted $6 billion in 2017 revenue, a welcome 4 percent increase that undoubtedly had Alcon executives breathing sighs of relief.
It was perhaps this return to profitability that prompted Novartis to formally announce Alcon’s spinoff in early July of this year. The eye care division will become a separately traded, standalone company. Novartis will initiate a share buyback of up to $5 billion to be executed by the end of 2019. This action is planned to be largely funded through the proceeds of the divestment to GSK of the consumer health joint venture stake, net of the AveXis acquisition payments.
“Our strategic review examined all options for Alcon ranging from retention, sale, IPO to spinoff,” Novartis Chairman Reinhardt commented when the spinoff was announced. “The review concluded that a spinoff would be in the best interests of Novartis shareholders and the Board of Directors intends to seek shareholder approval for a spinoff at the 2019 AGM. This transaction would allow our shareholders to benefit from potential future successes of a more focused Novartis and a standalone Alcon, which would become a publicly traded global medtech leader based here in Switzerland.”
Alcon’s Surgical franchise, which had been the main financial problem for the company in recent years, achieved 5 percent sales growth to post $3.7 billion in 2017 proceeds. This was primarily stimulated by double digit sales growth in vitreoretinal products and moderate revenue boosts in both cataract disposable surgical supplies and IOLs for cataract surgery.
Alcon’s Surgical franchise began its year by launching last January the AcrySof IQ PanOptix Toric presbyopia- and astigmatism-correcting IOL for patients with pre-existing corneal astigmatism undergoing cataract surgery. Having achieved CE mark certification November 2016, the lens provides a new option for astigmatic patients to address near, intermediate, and distance vision needs. It expands the PanOptix trifocal platform first launched in September 2015, utilizing the same trifocal optic as the AcrySof IQ PanOptix IOL on the front surface of the lens and the astigmatic correction features of a toric IOL on the back surface. At the time of launch, it was also the only IOL on the market with a 60 cm intermediate focal point, a preferred distance for many patients.
In March, the AcrySof IQ ReSTOR +2.5 Multifocal Toric IOL with ActiveFocus design obtained FDA approval for uncompromised distance vision and presbyopia correction. Previously, presbyopia-corrective IOL designs tended to compromise on distance vision to ensure a range of vision. The only multifocal toric IOL in which the central portion is 100 percent dedicated to distance vision, the ActiveFocus toric IOL provides clear distance vision and a range of vision to address astigmatism and presbyopia at the same time. The launch extended the AcrySof IQ platform to a broader population of nearly 2 million cataract patients with treatable astigmatism who undergo cataract surgery each year.
In July, U.S. reimbursement became effective for the CyPass Micro-Stent, a minimally invasive glaucoma surgical (MIGS) device that treats adult patients with mild to moderate primary open-angle glaucoma in conjunction with cataract surgery that Alcon launched in October 2016. Further, CyPass also gained positive feedback related to coverage and payment from all U.S. Medicare Administrative Contractors (MACs) and several major commercial payers. Positive feedback from the MACs means Medicare will cover CyPass in all 50 states, and the micro-stent is now included in leading national commercial payers’ plans.
Alcon also made efforts to bolster its customer training and technical service operations last September. The company formed the Clinical and Technical Services operation, which is charged with installing, maintaining, and training customers on technologies across cataract, refractive, and vitreoretinal surgery. Alcon had previously crippled customer loyalty somewhat by cutting spending on surgeon training in 2016 in order to compensate for falling sales. According to the company, the efforts to restore these services were well received.
In October, Alcon’s Clareon IOL with the AutonoMe preloaded delivery system gained EU approval. Featuring an automated CO2-powered mechanism and ergonomic design, the first-of-its-kind disposable IOL delivery system permits precise, single-handed IOL placement into the capsular bag in cataract surgery patients. The Clareon hydrophobic acrylic IOL loaded into AutonoMe had previously gained CE mark approval four months prior, and is made of an optic polymer biomaterial that allows for improved clarity for cataract patients.
Sales for the Vision Care franchise swelled a modest 3 percent to $2.1 billion in 2017. Contact lens revenues, resting on the back of continued double-digit growth of water-gradient lens Dailies Total 1, rose 4 percent from the previous year. Contact lens care products were in line with the prior year.
In March, Alcon launched Air Optix Choice, a program that equips patients with the latest technology in monthly contact lenses and an easy-to-remember replacement schedule. The firm simultaneously extended its Dailies Choice Program, which expands patient access to Dailies contact lenses by reducing their price to that of two-week replacement lenses. Last May, the business launched U.S.-specific packaging for Dailies AquaComfort Plus (DACP) spherical contact lenses in 90-, 30-, and 5-packs to assist patients with proper lens care and wear. The DACP box’s new design features patient-friendly educational elements like detailed lens insertion and removal illustrations, a toll-free helpline and email address, and Dailies website access for at-home and online support. The DACP change is the first of several planned packaging changes.
In November, the Novartis division invested $97 million to expand its Johns Creek, Ga., operations center. It is the first phase of a multi-year project to boost production capacity for Dailies Total 1 contact lenses. In 2015, Georgia Gov. Nathan Deal proclaimed that Alcon had created 550 jobs and invested $500 million in the Johns Creek facility since 2013.
“Alcon’s expansion in Johns Creek reflects Georgia’s commitment to providing industry leaders with the best resources to compete worldwide,” Deal said in a news release last November. “Alcon already has a significant economic footprint in the Johns Creek area and with this expansion, the company is deepening its investment in our top-ranked business climate. With the next phase of this project, Alcon will create even more high-tech jobs for Georgians using our cutting-edge technological capabilities as a foundation for future innovation in eye care. We are proud of Alcon’s success and appreciate the company’s commitment to creating jobs and investing in the Johns Creek community.”
As part of the firm’s strategic review, Novartis also decided to move over-the-counter and diagnostic ophthalmic products from the Innovative Medicines division to Alcon, which became effective Jan. 1 of this year.
Under New Management
Last September, Novartis CEO Joe Jimenez announced he would step down from the position after eight years of leading the company. Jimenez began his tenure leading Novartis’ Consumer Health division, advanced to the position of division head of Novartis Pharmaceuticals, taking the reins of the company in 2010. Effective Feb. 1 of this year, former global head of drug development and chief medical officer Vasant Narasimhan, M.D., was installed as CEO.
“Both from a professional and a personal perspective, this is the right moment to hand the leadership reins of the company to Vas,” Jimenez said in a company statement. “Our strong pipeline and the strategic moves we have taken to focus the company have put Novartis on a strong path for the future. On the personal side, after 10 wonderful years in Switzerland, my family is ready to return to Silicon Valley and the U.S. I’m confident that Vas will be an excellent successor.”
Dr. Narasimhan joined Novartis in 2005, having previously worked at global management consulting firm McKinsey & Company. An elected member of the U.S. National Academy of Medicine, he held numerous leadership positions across Novartis in commercial, drug development and strategy roles. Prior to his role as head of drug development and chief medical officer, he served as head of development for Novartis Pharmaceuticals.
“I would like to congratulate Joe and express my gratitude to Joe, Joerg, and the Board of Directors,” Dr. Narasimhan said. “I feel honored and humbled to be asked to lead Novartis. We will continue our legacy of bringing leading innovation to patients around the world. With our recent launches, our strong pipeline, broad capabilities, leadership team, and committed people, I am very confident about our future.”