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Novartis 'reviewing options' for Alcon division

Possible sale or spin-off in store for eyecare unit as firm reports Q4 operating loss of $132m

Novartis said today it is considering a spin-off for its struggling Alcon eyecare unit, but stressed that no decisions have been made and a range of options are on the table.

A review of Alcon's operations will take place over the course of 2017, but any decision will apply only to the devices portion of the business - such as surgical devices and contact lenses - as ophthalmic drugs have been integrated into the broader pharma business, said Novartis.

"The review will explore all options, ranging from retaining the business to separation via a capital markets transaction" such as an initial public offering (IPO) or spin-off, said the company in its fourth quarter 2016 results statement.

Novartis has been mulling a possible sale or spin-off of Alcon for some time, as the unit has been grappling with a lacklustre outflow of new products and inconsistent supply levels and customer service that has hit sales.

Last year, chief executive Joe Jimenez set a deadline for Alcon to get sales back on track by the end of 2016, but fourth quarter sales were flat - even though the contact lenses business delivered a third quarter of consecutive growth - and the division made an operating loss of $132m.

All told, Novartis reported a 2% decline in sales to $12.52bn in the quarter, with Alcon down 3% to $5.8bn and the branded pharma business also down 3% to $8.3bn. Only the Sandoz generics division stayed in positive territory, with a 2% rise in sales to $2.6bn spurred by growth in biosimilars, which matched expectations of $1bn for the full-year.

The company is expecting 2017 to continue to be pressured as former top-selling cancer drug Glivec/Gleevec (imatinib) continues to face generic competition, with a return to growth next year driven by new products.

Among these, psoriasis therapy Cosentyx (secukinumab) entered the blockbuster category in 2016 with sales of $1.1bn - setting it on course to reach Novartis' target of $4-5bn in peak sales - while chronic heart failure therapy Entresto (sacubitril and valsartan) continued its slow growth to reach $170m.

Entresto is expected to gather momentum this year - with prescriptions set to triple according to Jimenez - as the salesforce is now fully in place and reimbursement coverage in the US is more comprehensive.

The CEO said that Novartis would continue its policy of bolt-on acquisitions to boost the pipeline, and would also start a buyback of $5bn-worth in shares.

In 2016 the company made "major strides in advancing our pipeline, executing our bolt-on M&A strategy and implementing our new focused organisation," he added.

Article by
Phil Taylor

25th January 2017

From: Sales



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