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Alcon spin-out more likely but not imminent, says Novartis

A stand-alone company could offer “additional shareholder value”


A better financial performance by Novartis’ eyecare division Alcon seems to be raising the chances of it being spun out of the group.

Net sales at the unit rose 7% to $1.53bn in the third quarter while operating profit rose 23% to £238m, and Novartis says a strategic review of Alcon’s position in the group “indicates that creating a stand-alone company via a capital markets exit could create additional shareholder value”.

Novartis officially started its review of Alcon’s future earlier this year after a protracted period of lacklustre performance, but only after it narrowed the focus of the unit on devices and subsuming ophthalmic drugs into the pharma division.

Chief executive Joe Jimenez - due to be replaced by head of drug development Vas Narasimhan next year - has made it clear that no swift decision will be taken, and will also depend on a consistent recovery in Alcon’s finances pushing any action out to 2019, telling CNBC that any action “must be done from a position of strength”.

Other options for Alcon include “a potential capital markets solution, including financial carve-outs, tax and legal entity structuring, and identifying listing and incorporation locations”, said the company in a statement.

Alcon re-emerged as one of the engines of Novartis’ growth in the third quarter along with fast-growing psoriasis blockbuster Cosentyx (secukinumab) and heart failure therapy Entresto (sacubitril/valsartan), which has started to build momentum after a slow start.

Cosentyx continued its meteoric rise with sales of $556m in the quarter - up 85% and well ahead of analyst expectations - while Entresto more than doubled its sales to $128m (up 138%) thanks to improved reimbursement coverage in the US and the continued roll-out in international markets.

The growth of these products helped counteract the continued sales declines for cancer drug Gleevec/Glivec (imatinib), which fell to $445m from $834m a year ago, and allowed Novartis to post an overall 2% increase in revenues to $12.4bn in the third quarter.

The results are the first for Novartis since it scored a world first - claiming approval for its CAR-T Kymriah (tisagenleucel) and introducing a new type of immunotherapy for cancer - and was joined in the new category by Gilead/Kite Pharma’s Yescarta (axicabtagene ciloleucel) last week.

Article by
Phil Taylor

24th October 2017

From: Sales



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