No 'quick fix' to financial woes for Novartis' underperforming Alcon business: Analyst
|Novartis CEO Joe Jimenez|
Novartis ($NVS) has been struggling under the weight of its slumping Alcon eye-care business, and the company is planning to unveil a growth plan soon to try to get things back on track. But don't expect things to improve in the blink of an eye, one analyst says.
There's no "quick fix" to Alcon's financial woes, Berenberg analyst Alistair Campbell told Reuters. Novartis knows that is has "lagged behind on innovation in both the intraocular lens and drug segments but fixing both with not happen overnight," Campbell said. The Swiss company will reveal a "growth acceleration program" for Alcon on Jan. 27 along with its 2015 financial results, Reuters reports, delivering on CEO Joe Jimenez's previous calls for innovation for the unit.
But Novartis will have its work cut out for it. The company is facing ongoing declines in revenue for Alcon thanks to slumping surgical equipment sales, declines in revenue for its intraocular lens implants for cataract patients and disappointing numbers for its over-the-counter contact lens solution business, which could go on the auction block soon. In December, reports surfaced that Novartis might decide to unload its contact care business in an effort to revive sales. A deal could bring in as much as $1.6 billion, Kepler Cheuvreux analyst Fabian Wenner said. And other analysts said that it's only a matter of time before Novartis decides to dispose of the business.
|Google and Novartis are teaming up to develop Google's "smart lens" technology for glucose monitoring and presbyopia.--Courtesy of Google|
"With the market shift to daily disposable lenses, Novartis will be questioning whether the lens care business is core or unnecessary," Mirabaud Securities analyst Nick Turner said at the time. "On the one hand it is high margin and will be a loss to division cash flow, but if Alcon continues to be a drag on group performance, its days could be numbered."
Jimenez, for his part, doesn't seem opposed to selling underperforming businesses. The helmsman has said that he is open to "peeling off underperforming parts of Alcon." And if things don't shape up quickly, the company could change its tune on holding onto the unit as a whole. "You have an on-trend business with an aging population" Jimenez said in October, as quoted by Reuters. "If it doesn't improve, then we've got a different conversation."
In the meantime, Novartis is targeting eye-care innovation to give its numbers a boost. The company is working with Verily--formerly Google Life Sciences--to develop a smart lens for ocular medical uses and glucose monitoring. The project is "progressing well" and the pair plan to test a first prototype of the product, a smart lens for vision correction in people with presbyopia, or age-related farsightedness, on humans in 2016, Jimenez said last year.
- read the Reuters story
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