Novartis has started a revamp of its business – including changes at the top of its Alcon eyecare division – after missing sales and earnings targets in its fourth quarter results.
The company has said it will strip out the ophthalmic drug business from Alcon and transfer products either to its pharmaceuticals or generics divisions, after a 13% fall in sales at the unit to $2.3bn. Overall revenues at the group fell 4% to $12.5bn.
The poor performance of Alcon dragged down operating income at the Swiss group – falling 64% to $132m – but it was not the only reason for its poor showing.
Reported pharma sales were flat at $7.9bn – although its multiple sclerosis therapy Gilenya (fingolimod) and the cancer drugs recently acquired from GlaxoSmithKline did well, revenues at generic unit Sandoz fell back 8% to $2.3bn.
There was also disappointment for the company on sales of new heart failure therapy Entresto (valsartan/sacubitril), which mustered just $5m in sales in the fourth quarter thanks to a slow take-up into formularies.
The company is expecting accelerating growth from the drug in 2016 now that prescribing barriers for Entresto have started to fall.
Novartis’ response to its sales dip includes the appointment of new leadership at Alcon, with former Hospira chief executive Mike Ball taking over from Jeff George with a remit to return the unit to profit before the end of the year.
After the bulk of its pharmaceutical products are transferred elsewhere, Alcon will focus on vision care products such as contact lenses and its eye surgery product lines.
Novartis’ chief executive Joe Jimenez said on a conference call about the results that the problems at Alcon related to a lack of innovation – not replacing products succumbing to generic competition – insufficient efforts on surgeon education and training, and a lack of scale.
With a more focused unit, the emphasis will now be on spending sales, marketing and development cash to make the most of the current portfolio and new launches, and Jimenez expects a turnaround in the latter half of the year.
However, although he wants to retain the business Novartis could consider a sale or spin-out of Alcon if the expected turnaround does not take place, according to a Financial Times report.
Meanwhile, Novartis also plans to restructure its drug development operations and centralise manufacturing “to lower our cost base”, said Jimenez. All told, Novartis wants to cut $1bn off its annual operating spend by 2020.
The R&D shake-up will follow a similar pattern to Novartis’ well-received integration of its business services operations and will see multiple groups that are doing the same work – for example safety, pharmacovigilance and regulatory – combined into one.
The changes will also see head of pharma development Vas Narasimhan step up to a new role as global head of drug development and chief medical officer.
Meanwhile Novartis is also making changes, in a similar vein, within its manufacturing operations.
The firm’s currently-separate manufacturing efforts across divisions will be combined on the basis of the technology involved – for example solid doses, aseptic manufacturing and biologic drugs – in order to improve capacity planning, improve efficiencies and make it easier to roll out new processes and equipment.
“We have a plan for Alcon, which we can execute immediately, and this is going to make us a stronger and a better company as we move to make some of the changes in both drug development as well as our manufacturing footprint,” said Jimenez.
By Phil Taylor
Source: PMLive
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