The pharmaceutical business from Switzerland Novartis AG (VTX:NOVN) had a poor 2016, and to make matters worse, their eye-care business Alcon is still struggling. It seems like the Novartis management is on the verge of giving up hopes for Alcon.
Joe Jimenez, the Chief Executive said on Wednesday, “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 also added that a decision will be arrived at sometime in 2017, probably towards the end of the year.
Novartis Doesn’t Rule Out Any Options
Joe said, “We are not ruling out any option”, adding that a public market spinoff would be a huge opportunity for the shareholders, as listed eye-care device makers that are this big are rare. Alcon makes devices and contact lenses for lens replacement surgery. Novartis had taken full control of the business seven years back in a deal that was worth $51.6 billion at the time, in the hope of earning good revenues, as the eye-care market has been growing fast.
However, Novartis has been struggling with Alcon ever since the acquisition. Jimenez had expressed his hope a year back that focusing on devices and new leadership might turn things around. The ophthalmology drugs of Alcon were moved into the broader pharmaceuticals division of Novartis. Alcon was expected to return to growth in the second half of 2016.
Alcon Sales Flat in the Last Quarter
But things didn’t go as planned. Sales have been flat in the fourth quarter, even though the CEO says there are signs of improvement. For instance, the sales of contact lenses have grown for the third successive quarter. But it seems like, this is too little for the liking of Novartis.
Overall, Novartis (VTX:NOVN) had a poor last quarter. Net income is $2.66 billion, down by 2 percent. Analysts had predicted this to be $2.72 billion. Net sales have also dropped by 2 percent as stands at $12.32 billion. The patent of cancer drug Gleevac expired, which made the sales figures come down by $2.4 billion.
The business admits they are going through a “tough time right now”. However, Joe Jimenez is hopeful that new growth products will help them offset the decline quickly. Novartis is expecting this growth by the end of 2017.