Sector News

Novartis says 'never say never' to Alcon disposal

September 17, 2016
Life sciences

Novartis cannot rule out selling its Alcon eye care and surgery equipment division, its chief lawyer said on Thursday, helping fan speculation the Swiss drug company could offload a business that has been struggling to revitalize sales.

General Counsel Felix Ehrat told a mergers and acquisitions conference in Zurich that Alcon’s position as a leading surgical instruments maker fits Novartis’s overall strategy of focusing on divisions which are among the largest players in their respective sectors.

However, pressed on whether Novartis would rule out the prospect of an Alcon sale, Ehrat said at the conference organized by Swiss newspaper Finanz und Wirtschaft that such a pledge “wouldn’t be clever”.

“Never say never,” he added.

Early this year Novartis Chief Executive Joe Jimenez replaced Alcon’s chief executive following successive quarters of falling sales, attributing the poor performance to a lack of innovative new products and waning customer focus.

The division’s new boss Michael Ball is concentrating on top-line growth at the expense of profitability as he seeks to reinvigorate sales by year’s end.

But Alcon’s poor performance and status as a device maker following the move this year of its ophthalmic drugs business into Novartis’s main pharmaceuticals division, has fueled talk it is on the disposal block, especially if Ball’s turnaround effort fails.

“Alcon will either be fixed or sold,” David Evans, an analyst at Kepler Cheuvreux, wrote in a recent note to investors.

Sales have been in decline since 2014 at Alcon, which the Swiss drugmaker gradually bought up from food maker Nestle in a series of deals totaling $51 billion, with the final portion acquired at the end of 2015.

Last year sales at Alcon fell 9 percent to $9.8 billion, including $3.8 billion from the drugs business which has since been moved out of the division.

Novartis had sought to integrate the unit and its U.S.-centric culture – Alcon is based in Fort Worth, Texas – into the rest of the company, Ehrat said on Thursday, but a business model vastly different from the patent-protected world of drugs may have hampered the effort.

“As the current, temporary difficulties may illustrate, not everything worked optimally,” Ehrat said. “I wouldn’t say that’s a result of failed integration, rather the result of a not 100 percent successful integration.”

By John Miller

Source: Reuters

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