- Swiss pharma Novartis is reviewing options for its struggling eye-care unit Alcon, including separating the business through a public offering or spin-off, the company said in an earnings update Tuesday.
- Review of the unit will continue throughout the year, with an update planned towards the end of 2017. Novartis could still end up retaining Alcon, which includes surgical and vision care segments. Ophthalmic pharmaceuticals, such as Lucentis (ranibizumab), are included in Novartis' medicines group.
- Elsewhere, the anti-inflammatory drug Cosentyx (secukinumab) continued to impress, reaching blockbuster status with U.S. net sales of $1.1 billion in 2016. Cosentyx, along with the slower growing heart med Entresto (sacubitril/valsartan), are important drivers for growth amid patent exclusivity losses.
Novartis reported flat fourth-quarter sales from Alcon on a constant currency basis, with lower surgical sales offsetting a return to growth for its vision care segment. The contact lens portfolio continues to be the unit's main strength, with three consecutive quarters of growth.
Mike Ball, head of the Alcon business, said the division’s game plan has been to invest in direct-to-consumer advertising since vision care is a consumer business. He said it’s been more challenging to fix supply and service issues.
Vision care has had "four consecutive months of modest gain, which suggests some stabilization of the business," Ball said. "I really like the vision care business. It’s got 3% to 4% growth and high barriers to entry."
Still, the unit clearly has failed to turnaround as fast as Novartis wants with the announcement of the review.
Loss of patent protection for Novartis' cancer medicine Gleevec (imatinib) weighed on Novartis throughout 2016. Sales of the blockbuster drug fell by 37% in the fourth quarter, compared to the same period a year previous. All told, sales for the year were down by 29% versus 2015.
That sharp erosion has put pressure on Novartis' newer drugs, such as Cosentyx and Entresto, to make up the lost revenue. So far, Cosentyx has delivered, reaching $1.13 billion in annual sales. Entresto, however, has struggled and earned only $170 million in 2016 — $30 million under Novartis' sales target of $200 million. The Swiss company has invested heavily in marketing and commercializing the drug with hopes to accelerate its growth.
As for 2017 priorities, the company said it is focusing on delivering financial targets, strengthening R&D and "ensuring world class commercial execution," including accelerated sales of Entresto and Cosentyx.
Novartis reported net sales of $12.3 billion for the fourth quarter, a 2% decline compared to results from Q4 2015. Annual net sales also dropped 2%. (In constant currencies, Q4 sales and 2016 sales were flat.)
The Swiss pharma also announced a share buyback of up to $5 billion, financing the purchases with new debt.
Net sales in 2017 is expected to be in line with 2016 numbers after accounting for the impact of generic competition, which Novartis estimated to be approximately $2.5 billion this year.