Novartis on Friday said it intends to spinoff Alcon, its eye care division, into a separately-traded standalone company, which would enable Novartis and Alcon to focus fully on their respective growth strategies.
Novartis also said it will initiate a share buyback of up to $5 billion by the end of 2019, which should be funded through the proceeds of the divestment to GSK of the consumer health joint venture stake, net of the AveXis acquisition payments.
Joerg Reinhardt, Chairman of Novartis, said that the company has examined all options for Alcon ranging from retention, sale, IPO to spinoff. He said that the conclusion was that a spinoff would be in the best interests of Novartis shareholders and the Board of Directors intends to seek shareholder approval for a spinoff at the 2019 AGM. He added that the transaction would allow Novartis’s shareholders to benefit from potential future successes of a more focused Novartis and a standalone Alcon, which would become a publicly traded global medtech leader based here in Switzerland.
2017 sales of $4.6 billion
Novartis pointed out in its press release that, when it acquired Alcon in 2011, the business included surgical, vision care and ophthalmic pharmaceuticals, and in January 2016, it began the process of creating two best-in-class businesses with the transfer of Alcon’s ophthalmic pharmaceuticals to the Novartis Innovative Medicines Division. Novartis said that the leading ophthalmology pharmaceuticals business will continue to develop as part of Novartis, with 2017 sales of $4.6 billion and the potential blockbuster medicine RTH258 (brolucizumab) in development for neovascular AMD and diabetic macular edema. The Alcon Division is now fully focused on surgical and vision care, and continues to be the global leader in eye care devices, the press release reads.
Vas Narasimhan, CEO of Novartis, said: “We continue to execute our strategy to focus Novartis as a leading medicines company. Alcon has returned to a position of strength and it is time to give the business more flexibility to pursue its own growth strategy as the world’s leading eye care devices company. We will work to ensure a smooth transition for Alcon and Novartis associates while preparing for the launch of RTH258 and building our leading ophthalmology pharmaceuticals business.”
Narasimhan added that the share buyback is fully aligned with the company’s strategic capital allocation priorities, reflects its strict financial discipline and its confidence in future top line growth and margin expansion.
Mike Ball will become Chairman-designate of Alcon, from July 1, 2018, reporting to the CEO of Novartis. Ball will focus on preparing Alcon for the intended spin, and will start the process of recruiting a Board of Directors (BoD) for Alcon and meeting Novartis shareholders, and other potential investors, in preparation for a potential spinoff. Novartis said that if Alcon becomes an independent company, Ball would become Chairman of the Alcon BoD. In order to focus fully on the Alcon separation, Ball will step down from the Executive Committee of Novartis (ECN) on July 1, 2018.
David Endicott, Chief Operating Officer (COO) of Alcon since July 2016, will be promoted to CEO of Alcon, also effective July 1, 2018, and will not become a member of the ECN. He will also report to Vas Narasimhan until the potential spinoff, Novartis said. The operational management responsibilities will be taken over by Endicott, who is a highly experienced leader in medical devices and pharmaceuticals having also previously held senior leadership positions with Allergan and Hospira, Novartis noted, adding that, as Alcon COO he played an integral role in the turnaround of the business.
Mike Ball, CEO of Alcon, said: “This promises to be the beginning of an exciting new chapter for everyone associated with Alcon. The planned spinoff will be key to strengthening our leadership in the large, attractive and growing global eye care devices market. As Chairman-designate, I look forward to working closely with David Endicott and the entire team at Alcon to deliver continued innovation for our customers and patients, while creating shareholder value through long-term, sustainable growth.”
$7 billion in 2017 sales
Novartis said that, if the Alcon spinoff is completed, it would create a new Switzerland-based company with global scale and reach comprising more than 20,000 employees, with around $7 billion in 2017 sales. Fort Worth will continue to be a key location for Alcon.
In addition to being incorporated in Switzerland, the intention would be to list shares of Alcon on the SIX Swiss Exchange and the New York Stock Exchange, Novartis said.